Process: 354/2017-T

Date: March 19, 2018

Tax Type: IMI

Source: Original CAAD Decision

Summary

CAAD Process 354/2017-T addresses a critical IMI exemption dispute concerning properties located within classified urban ensembles under Article 44(1)(n) of the Estatuto dos Benefícios Fiscais (EBF). The claimant, owner of three autonomous fractions in Porto's classified urban ensemble, challenged a 2017 IMI assessment of €667.61, arguing that properties within an urban ensemble classified as public interest should qualify for exemption. The central legal question involves interpreting 'individually classified property' following Decree-Law 108/2008's amendments. The claimant contended that the Ministry of Culture's classification of the urban ensemble under Law 107/2001 extends exemption to all constituent properties. The Tax Authority raised a significant preliminary objection, citing a pending administrative court case (Administrative and Tax Court of Porto) challenging the exemption rejection decision as a prejudicial question requiring suspension of arbitration proceedings. The Authority argued that 'individually classified property' refers only to specific monuments or sites, not all units within an ensemble, asserting that the urban ensemble itself is not a 'property' under civil or tax law concepts. Additionally, the Tax Authority challenged whether constitutional principles of tax equality and taxpaying capacity support extending exemptions broadly. The claimant also sought compensatory interest for allegedly improper tax collection. This case exemplifies the procedural complexity when parallel administrative and arbitration proceedings address interrelated issues, raising questions about CAAD's jurisdiction when prejudicial questions exist in tax benefit disputes.

Full Decision

ARBITRAL DECISION

Report

A - General

A…, S.A., with tax identification number… and legal entity number…, with registered office at…, …, no…, …-… Porto (hereinafter referred to as the "Claimant"), filed, on 01.06.2017, a request for constitution of a sole arbitral tribunal in tax matters, which was accepted, seeking, on the one hand, a declaration of illegality of the assessment act for Municipal Property Tax (hereinafter "IMI"), for the year 2017, relating to autonomous units of which it is the owner, as shall be seen below, included in the payment note no. 2016…, concerning the first instalment, in the total amount of € 667.61 (six hundred and sixty-seven euros and sixty-one cents), and, on the other, recognition of the right to indemnity interest for the improper payment of tax liabilities.

Pursuant to the provisions of subparagraph a) of paragraph 2 of Article 6 and subparagraph b) of paragraph 1 of Article 11 of Decree-Law no. 10/2011, of 20 January, as amended by Article 228 of Law no. 66-B/2012, of 31 December, the Ethics Council of the Administrative Arbitration Centre (CAAD) appointed the undersigned as arbitrator, and the Parties, after being duly notified, did not lodge any objection to this appointment.

By order of 19.06.2017, the Tax and Customs Administration (hereinafter referred to as the "Respondent") appointed Mr. Dr. B… and Dr. C… to intervene in the present arbitral proceedings, in the name and representation of the Respondent.

In accordance with the provisions of subparagraph c) of paragraph 1 of Article 11 of Decree-Law no. 10/2011, of 20 January, as amended by Article 228 of Law no. 66-B/2012, of 31 December, the Arbitral Tribunal was constituted on 10.08.2017.

On 11.09.2017, the highest-ranking official of the Respondent's department was notified to, if they so wished, present a reply within 30 days and request the production of additional evidence.

On 09.10.2017, the Respondent presented its reply.

B – Position of the Claimant

The Claimant is the owner of the units designated by the letters "J", "O" and "P" of the property located at…, no … parish of …, municipality of Porto, registered in the respective property register under article … [sic], to which correspond the property cards that the Claimant attaches to its request as documents no. 2 to no. 4, the contents of which are deemed to be reproduced (hereinafter referred to as the "Property").

The Respondent, on 03.03.2017, carried out the IMI assessment referred to in 1.1., the payment document relating to the first instalment of which was attached to the request for arbitral award as document no. 1, the contents of which are deemed to be reproduced.

The Claimant made payment of the first instalment of the IMI referred to above on 24.03.2017 in the amount of € 667.61 (six hundred and sixty-seven euros and sixty-one cents).

Until the entry into force of Decree-Law no. 108/2008, of 26 June, "all immovable property forming part of a certain urban ensemble of public interest" were exempt from IMI, and after that reference was made to "individually considered immovable property", without clarifying the meaning of that expression.

Interpreting subparagraph n) of paragraph 1 of Article 44 of the Tax Benefits Statute (hereinafter "TBS") it should be concluded that the legislator did not wish to exclude from the tax benefit all immovable property forming part of an urban ensemble, but only those which, not forming part of an urban ensemble, individually cannot be classified by the Ministry of Culture, there being no possibility of individual classification of immovable property as immovable property of public interest, but only of urban ensembles.

In the case at hand, the Ministry of Culture, under Law no. 107/2001, of 8 September, called the Framework Law for Cultural Heritage (hereinafter the "FLCH"), classified as a matter of public interest the urban ensemble of … between the … and Avenue …, an area to which the Property belongs.

Subparagraph n) of paragraph 1 of Article 44 of the TBS, using the expression "individually classified property", intends to refer to a monument, site or urban ensemble, which is why the Property is exempt from IMI, and the assessment now in question is illegal.

The indemnity interest claimed is due, since the Claimant paid a tax liability which it considers to be illegal.

C – Position of the Respondent

The Respondent begins by raising an initial question: the IMI payment note to which the Claimant refers does not relate only to the Property, but to other immovable property that do not form part of the urban ensemble of … between the … and Avenue … .

The Respondent raises a preliminary objection, stating that the assessment in question is the result of the decision rejecting the request for IMI exemption rendered on 12.07.2017, against which the Claimant brought an administrative action, which is pending before the Administrative and Tax Court of Porto under no. …/17…BEPRT, an action which constitutes a prejudicial question in relation to the matter of the present proceedings, since the legality of the decision that rejected the IMI exemption represents a legal-logical antecedent of the assessment whose legality must be assessed, which justifies the suspension of the present proceedings.

It is true that no legal definition is offered for "individually considered immovable property", for the simple reason that this expression does not represent any particular concept, and its meaning can be grasped by the correct interpretation of each of the terms that compose it.

It is an abusive interpretation that all properties inserted in the "urban ensemble" are, merely by that fact, classified and, as such, exempt from IMI.

Furthermore, the tax benefit at issue in the present proceedings is inseparably linked to a property, and it is certain that the "urban ensemble of … between the … and Avenue…" is not a property, and the notion of "immovable cultural property" does not coincide with the civil and tax notions of "property".

The Respondent further contends that it was not proven that the Property is located in the said "urban ensemble of … between the … and Avenue …".

The arbitral case law cited by the Claimant does not refer either to the "urban ensemble of … between the … and Avenue …" or even to the question that must be assessed in the present proceedings, namely, the meaning of "individually classified property".

Furthermore, the interpretation put forward by the Claimant is contrary to the Constitution, insofar as it violates the principle of tax equality, the principle of taxpaying capacity and the principle of local autonomy.

D – Conclusion of the Report and Case Management

By order of 19.02.2018, the Arbitral Tribunal dispensed with the hearing provided for in Article 18 of the Legal Regime for Tax Arbitration (LRTA), considering that the Parties had already brought to the proceedings the necessary and sufficient factual elements for the rendering of the decision, and extended by a further two months the deadline for rendering the decision, which was expected to take place by 29.03.2018, and the Parties were given a deadline for the submission of successive written submissions.

The Claimant did not submit submissions, and the Respondent submitted its submissions on 08.03.2018, summarizing what had already been argued in the Reply submitted.

The arbitral tribunal is materially competent, in accordance with the provisions of Article 2, paragraph 1, subparagraph a) of the LRTA.

The Parties have legal standing and capacity and have legitimacy in accordance with Article 4 and paragraph 2 of Article 10 of the LRTA, and Article 1 of Regulatory Order no. 112-A/2011, of 22 March.

The cumulation of claims (declaration of illegality of an assessment act, on the one hand, and recognition of the right to indemnity interest, on the other) made in the present request for arbitral award, in accordance with the principle of procedural economy, is justified since Article 3 of the LRTA, by expressly admitting the possibility of "cumulation of claims even if relating to different acts", accommodates, without hermeneutical abuse, the assessment of a claim that follows, necessarily, from the judgment that the Arbitral Tribunal reaches regarding the validity of the assessment in question.

The proceedings do not suffer from any nullity.

Since the objection of lack of prejudicial question regarding the request for arbitral award has been raised, this must be the first question to be assessed, since its success would prevent the immediate judgment of the merits of the case.

Factual Matters

2.1. Proven Facts

The Claimant is the owner of the units designated by the letters "J", "O" and "P" of the property located at …, no…, parish of …, municipality of Porto, registered in the respective property register under article … (and not…, as stated by the Claimant), to which correspond the property cards attached to the request for arbitral award as documents nos. 2 to 4.

The Respondent, on 03.03.2017, carried out the IMI assessment referred to in 1.1., the payment document relating to the first instalment of which was attached to the request for arbitral award as document no. 1.

The Claimant made payment of the first instalment of the IMI referred to above on 28.04.2017 (and not on the date mentioned by the Claimant), in the amount of € 667.61 (six hundred and sixty-seven euros and sixty-one cents), as evidenced by document no. 6 attached to the request for arbitral award.

The Claimant submitted the request for arbitral award regarding the illegality of the assessment in question on 01.06.2017.

The Respondent was notified of the submission of the request for arbitral award on 12.06.2017.

The Respondent began to intervene in the proceedings by submitting a motion on 19.07.2017.

The arbitral tribunal was constituted on 10.08.2017, and the Respondent was notified of this on the same day.

The Ministry of Culture, under the FLCH, classified as a matter of public interest the urban ensemble of … between the … and Avenue … (see Regulatory Order 400/2010, Official Gazette 114, Second Series, 15/06/2010), a geographical area in which the Property is integrated.

The IMI payment note attached by the Claimant to the request for arbitral award as document no. 1 does not relate only to the Property but to other immovable property that do not form part of the urban ensemble of … between the … and … .

The units designated by the letters "J", "O" and "P" of the property located at …, no…, parish of…, municipality of Porto, registered in the respective property register under article … were assigned, respectively, the following tax property values: € 391,035.33 (three hundred and ninety-one thousand and thirty-five euros and thirty-three cents), € 21,334.18 (twenty-one thousand three hundred and thirty-four euros and eighteen cents) and € 10,777.60 (ten thousand, seven hundred and seventy-seven euros and sixty cents), as evidenced by documents nos. 1 to 4 submitted by the Claimant to the request for arbitral award.

The IMI collection for the year 2017 relating to each of the units designated by the letters "J", "O" and "P" of the property located at …, no…, parish of …, municipality of Porto, registered in the respective property register under article … is, respectively, € 1,266.95 (one thousand two hundred and sixty-six euros and ninety-five cents), € 69.12 (sixty-nine euros and twelve cents) and € 34.92 (thirty-four euros and ninety-two cents), which corresponds to a total collection (in relation to the stated units) of € 1,370.99 (one thousand three hundred and seventy euros and ninety-nine cents), as evidenced by document no. 1 submitted by the Claimant to the request for arbitral award.

The Claimant requested an IMI exemption for the Property, a request that was rejected on 12.07.2017 by the Head of Finance of Porto … (Article 10 of the Respondent's reply and document no. 2 which it attached thereto).

The Claimant filed an administrative action seeking to annul the decision rejecting the tax benefit of IMI exemption that it had requested, which is pending before the Administrative and Tax Court of Porto, Organizational Unit …, under no. …/17…BEPRT (document no. 1 presented with the Respondent's Reply).

The Respondent was served with the action referred to in 2.1.13. on 04.09.2017 (document no. 1 presented with the Respondent's reply).

The Respondent, after the service referred to in 2.1.14. and on a date prior to 09.10.2017, presented its defence.

2.2. Unproven Facts

It was not proven that the Directorate General of Cultural Heritage has certified, pursuant to the FLCH, that the Property is individually classified. There are no further facts relevant to the assessment of the merits of the case that have been deemed unproven.

2.3. Basis for Determining Factual Matters

The facts were found to be proven or unproven based on the documents submitted to the proceedings by the Parties and on the positions they assumed in the pleadings submitted.

Matters of Law

3.1. Issues to be Decided

It follows from what has been stated above that the issues to be assessed are, in essence, the following:

Whether the preliminary objection of lack of prejudicial question raised by the Respondent is valid, which would lead to the suspension of the present arbitral proceedings;

To determine whether the Property, for the purposes of subparagraph n) of paragraph 1 of Article 44 of the TBS, is individually classified as being of public interest or municipal interest, in accordance with applicable legislation, and consequently benefits from IMI exemption; and

Finally, to clarify whether, should the request for declaration of illegality and consequent annulment of the contested assessment act be upheld, the Claimant may, within the scope of the present arbitral proceedings, obtain an order condemning the Respondent to pay indemnity interest on the amount it paid to satisfy the tax liability illegally demanded by the Respondent.

3.2. The Preliminary Objection of Lack of Prejudicial Question

The Claimant requested an IMI exemption for the Property, a claim that was rejected on 12.07.2017 by the Head of Finance of Porto …, and the Claimant, in reaction to this rejection, filed an administrative action seeking to annul it, which is pending before the Administrative and Tax Court of Porto, Organizational Unit …, under no. …/17…BEPRT.

Now, in the administrative action pending before the Administrative and Tax Court of Porto, Organizational Unit…, under no. …/17…BEPRT, the question is whether the very same Property should or should not benefit from the IMI exemption referred to in subparagraph n) of paragraph 1 of Article 44 of the TBS. The statement of claim in that proceeding, which the Respondent attached to its Reply as document no. 1, makes this very clear.

In any case, it must be recognized that, although requiring analysis of the same underlying question – which is, it must be stressed, whether the Property should be considered exempt from IMI under and for the purposes of subparagraph n) of paragraph 1 of Article 44 of the TBS – the scope of both claims is not the same. In fact, while the administrative action seeks the annulment of the decision rejecting the request for recognition of the IMI exemption, which in itself is not related to the concrete IMI assessment for a particular year, the request for arbitral award before us requires only the assessment of the legality of the IMI assessment for the year 2017.

One might even think that we are facing a situation of lis pendens, an exception which aims to prevent the repetition or contradiction of judgments (Articles 580 and 581 of the Code of Civil Procedure). The requirements of lis pendens are listed in Article 581 of said Code (hereinafter "CCP") and require triple identity:

Identity of parties;

Identity of claims; and

Identity of cause of action.

Now, there is no doubt that there is identity of parties. The assessment of the other two requirements is less clear. It is obvious that, in immediate terms, the administrative action and the present request for arbitral award do not formulate the same claim. There, the annulment of the decision rejecting the request for IMI exemption is sought; here, the annulment of an IMI assessment act is sought. Article 581(3) of the CCP makes identity of claims dependent on the intention to obtain the same legal effect and Article 581(4) of the same provision states that there is identity of cause of action when the claim raised in both actions proceeds from the same legal fact. An excessively formalistic reading[2], which we tend not to adopt, would consider the claims and cause of action to be distinct. Perhaps that was the reason why the Respondent did not invoke this dilatory exception.

The Respondent did, however, invoke, seeking suspension of the present arbitral proceedings, what it called the exception of lack of prejudicial question, because, in its view "the discussion of the (il)legality of the decision that rejected the IMI exemption (i.e., an act in tax matters) constitutes a question that represents a legal-logical antecedent of the assessment contested in the present arbitral proceedings"[3]. That is, "the discussion of the legality of the IMI assessment sub judice constitutes a question that depends on the understanding that is to be established upstream regarding the decision to reject the IMI exemption that is being assessed in the context of an administrative action before the Administrative and Tax Court of Porto"[4].

Article 272(1) of the CCP[5] provides that "the court may order suspension when the decision of the case is dependent on the judgment of another already pending or when another justified reason occurs".

It is worth extracting what was stated in this regard in Arbitral Proceeding no. 340/2017-T, whose considerations are hereby adopted:

For the purposes of Article 272 of the CCP, a case is dependent on the judgment of another already pending when the decision of the latter may affect and/or prejudice the judgment of the former, removing its foundation or its raison d'être, which happens, in particular, when, in the prejudicial case, a question is being assessed whose resolution may modify a legal situation that must be considered for the decision of the other action. (…).

Thus, a prejudicial case is understood to be one in which a fact or situation is discussed and investigated that is an element or requirement of the claim formulated in the dependent case, such that the resolution of the question being assessed and discussed in the prejudicial case will interfere with and influence the dependent case, destroying or modifying the foundations on which it is based.

Just as in cases of lis pendens or res judicata, the aim here is also, though not solely, to avoid the risk of substantive incompatibility between the decisions to be rendered in both actions and which could result from their simultaneous pursuit.

The possibility of suspending the proceedings in the prejudicial case – as a way to avoid incompatible judgments – is reinforced in situations where the grounds invoked for the claim raised in the prejudicial case are the same grounds that had already been invoked in the defence of the dependent case, to prevent the success of the claim raised therein (…).

There is no doubt that there are similarities, as to the grounds of their respective claims, between the statement of claim in the administrative action and the present request for arbitral award. In fact, much of the pleadings are literally identical. In the present arbitral proceedings, the Claimant appears merely to be challenging the IMI assessment for the year 2017. However, as can be read in the interlocutory decision rendered in Arbitral Proceeding no. 26/2011-T (which the Respondent attached to its Reply as document no. 3), this appearance cannot be maintained. What is sought, both in the administrative action and in the present arbitral proceedings, is an analysis of the legality or illegality of the grounds on which, on the one hand, the rejection of the request for IMI exemption submitted by the Claimant is based and, on the other, the IMI assessment for the year 2017. And the fact is that this analysis, as the request for arbitral award is formulated, is exhausted in the interpretation of subparagraph n) of paragraph 1 of Article 44 of the TBS, in order to ascertain whether the Property should or should not be considered as a property "individually classified as being of public interest or municipal interest, in accordance with applicable legislation", for the purposes of IMI exemption.

Let us bear in mind that tax arbitration is governed by the principle of expedition, inspired by the "national design to combat pending cases"[6], and the principle of the autonomy of the Arbitral Tribunal in conducting the proceedings and determining the rules to be observed in order to obtain, within a reasonable time, a decision on the merits of the claims raised assumes special importance[7]. Now, the autonomy of the Arbitral Tribunal in conducting the proceedings and determining the rules to be observed is reflected from the outset in the inconvenience of a necessary and immediate application of subsidiary legislation, particularly that of a procedural nature. Although Article 29 of the LRTA indicates subsidiary applicable legislation, its application in arbitral proceedings will always depend on a decision of the Arbitral Tribunal, which must pay special attention to the compatibility of the regime provided for in the subsidiary legislation with what is intended to be the cornerstone of tax arbitral jurisdiction: expedition[8].

It is also important to note that, in the case before us, the Respondent was notified of the request for arbitral award before being served with the administrative action. In fact, the Respondent was notified of the submission of the request for arbitral award on 12.06.2017 and of the constitution of the Arbitral Tribunal on 10.08.2017, and was only served with the administrative action on 04.09.2017[9].

Now, Article 272(1) of the CCP provides that "the court may order suspension when the decision of the case is dependent on the judgment of another already pending or when another justified reason occurs". As has been stated, the Arbitral Tribunal believes that the broader scope of the administrative action effectively encompasses what must be assessed in the present proceedings. In that action, it will be discussed whether the Tax and Customs Administration acted properly when it rejected the request for IMI exemption submitted by the Claimant, and it is certain that this judgment will have to answer the question of whether the Property should benefit from the exemption referred to in subparagraph n) of paragraph 1 of Article 44 of the TBS. However, if we bear in mind the dates on which the actions were filed and the dates on which the Respondent was notified of their existence, it is not accurate to state that the decision to be given in the present case is dependent on the judgment of another already pending (our emphasis).

Let us also recall that in the present proceedings the Claimant's request is limited to the assessment of the legality of the IMI assessment for the year 2017, a scope much more restricted than that which the Administrative and Tax Court of Porto will have to analyze.

Accordingly, considering the arguments raised above, the Arbitral Tribunal finds that the requested suspension of the arbitral proceedings, in view of the interests at stake, is not only unjustified but also does not appear to empty the scope of what must be assessed by the Administrative and Tax Court of Porto, Organizational Unit…, in proceeding no. …/17…BEPRT.

Suspension of the proceedings, without a fixed deadline and conditional on the finality of the administrative action, would be manifestly incompatible with the expedition that is intended to govern tax arbitral jurisdiction[10].

3.3. The Meaning and Scope of the Expression "Individually Classified as Being of Public Interest or Municipal Interest, in Accordance with Applicable Legislation" to Which Subparagraph n) of Paragraph 1 of Article 44 of the TBS Refers

The Claimant contends that the law does not specify the meaning of the expression "individually classified immovable property"[11] and believes that "the legislator did not wish to exclude from the tax benefit all immovable property forming part of an urban ensemble, but only those immovable properties which, not forming part of an urban ensemble, individually cannot be classified by the supervising Ministry"[12]. The Claimant further states that the Ministry of Culture, under the FLCH, only grants classification to urban ensembles, "never granting the classification of immovable cultural property of public interest to individual properties, except for monuments"[13].

Now, if we understand these statements correctly, the Claimant intends that all immovable properties forming part of the urban ensemble in question benefit, ipso facto, from the IMI exemption referred to in subparagraph n) of paragraph 1 of Article 44 of the TBS. With due respect, this Arbitral Tribunal cannot adopt such a conclusion.

In fact, despite the technical complexity that characterizes the legislative effort to protect cultural heritage, particularly that embodied in the FLCH, it cannot be said that the notion of "individually classified property" is lacking in it or in the TBS. We know what a "property" is (Article 2, paragraph 1 of the IMI Code) and we are not unaware of what "classification" means in this context: "the final act of an administrative procedure by which it is determined that a certain asset possesses an invaluable cultural value" (Article 18, paragraph 1 of the FLCH). Nor is the meaning of the word "individually" particularly opaque, being merely an adverb of manner related to a being, an object or a situation, as lexicographers teach.

As the Respondent correctly explains, the concept of "ensemble" admits that within it there may be immovable property devoid of cultural value in itself. Subparagraph n) of paragraph 1 of Article 44 of the TBS explicitly refers to properties individually classified as being of public interest or municipal interest, and therefore the IMI exemption that this provision establishes cannot be divorced from the concept of property. As is readily apparent, an urban ensemble, though worthy of protection and safeguard within the scope of the State's cultural duties, is not, for these or any other purposes, a "property" in the proper sense. A property forming part of the "urban ensemble of … between the … and Avenue …" may, as is evident, be worthy of individual classification and, to that extent, benefit from the IMI exemption established by the aforementioned provision of the TBS. However, the interpretation of subparagraph c) of paragraph 1 of Article 44 of the TBS does not appear to be authorized, either by the letter or even by the legislative intent, insofar as it would extend the IMI benefit provided therein to all and any properties within the perimeter of the said urban ensemble. If other arguments were lacking, and there are abundant arguments in this case, the use of the term "individually" would make it clear the doubts that might persist. This is because, as the Respondent correctly stated, contrary to what the Claimant claimed, not only is it possible to have individual classification of properties as being of public interest, but there are various cases in which this occurs.

Accordingly, in view of the arguments used by the Claimant, the Arbitral Tribunal sees no reason to annul the IMI assessment act in question, as the Arbitral Tribunal does not find that the Respondent made an abusive interpretation of subparagraph n) of paragraph 1 of Article 44 of the TBS.

3.4. Moot Questions

The analysis of the remaining arguments used by the Respondent to sustain the legality of the IMI assessment act in question and the assessment of the question relating to indemnity interest are rendered moot as unnecessary.

Decision

In accordance with and on the grounds set forth above, the Arbitral Tribunal decides:

To dismiss the preliminary objection of lack of prejudicial question raised by the Respondent;

To completely dismiss the request for arbitral award; and

To condemn the Claimant to bear the costs of the proceedings.

Value of the Case

When an assessment act is impugned, the value of the case is the amount whose annulment is sought, which corresponds to the economic value of the claim. Accordingly, in accordance with the provisions of Article 306(2) of the CCP, Article 97-A of the Code of Tax Procedure and also Article 3(2) of the Regulation of Costs in Tax Arbitration Proceedings, the value of the case is fixed at € 1,370.99 (one thousand three hundred and seventy euros and ninety-nine cents), determined in accordance with the criterion set out in 2.1.11. above.

Costs

For the purposes of Article 12(2) and Article 22(4) of the LRTA and Article 4(4) of the Regulation of Costs in Tax Arbitration Proceedings, the amount of costs is fixed at € 306.00 (three hundred and six euros), in accordance with Table I attached to said Regulation, to be borne entirely by the Claimant.

Lisbon, 19 March 2018

The Arbitrator

_______________________________
(Nuno Pombo)

Document prepared by computer, in accordance with Article 131(5) of the CCP, applicable by reference to Article 29(1)(e) of Decree-Law no. 10/2011, of 20 January, and in accordance with the spelling preceding the said Orthographic Agreement of 1990.

[1] See Arbitral Proceeding no. 340/2017-T
[2] See the dissenting opinion of Prof. Dr. Manuel Pires in the proceeding referred to in the previous note: "1. In the assessment of the problematic issue of submission to two trials, an excessively formalistic conception was adopted, disregarding a vision that attends to the ultimate objective of the invoked principle".
[3] Article 17 of the Reply.
[4] Article 18 of the Reply.
[5] Applicable subsidiarily by force of the provisions of Article 29(1)(e) of the LRTA.
[6] The suggestive words are those of Counselor Manuel Fernando dos Santos Serra. See Guide to Tax Arbitration, Almedina, 2017, p. 6.
[7] See Article 16(c) of the LRTA.
[8] See the illuminating commentary by Counselor Jorge Lopes de Sousa in Guide to Tax Arbitration, Almedina, 2017, p. 187.
[9] Regarding lis pendens, but with relevance to what we wish to emphasize, Counselor Jorge Lopes de Sousa understands that the moment that should be considered equivalent to service in civil proceedings, for purposes of Article 582 of the CCP, is that of Article 17 of the LRTA and not that of Article 13 of the same act, since this provision merely requires that the Respondent be made aware of the request for constitution of the Arbitral Tribunal and not the request for arbitral award. See Guide to Tax Arbitration, Almedina, 2017, p. 147. The fact is that, in the case before us, the Respondent submitted a motion on 19.07.2017 in which it acknowledges having been notified of the request for arbitral award and notes the absence of one of the documents referred to by the Claimant, which "prevents the analysis of the request". The Respondent was notified of the submission of said document the next day.
[10] See also the arguments invoked by the Arbitral Tribunal to reject the objection of lack of prejudicial question, in the context of Proceeding no. 379/2016-T.
[11] Articles 7 and 10 of the request for arbitral award.
[12] Articles 13 and 14 of the request for arbitral award.
[13] Articles 16 and 17 of the request for arbitral award.

Frequently Asked Questions

Automatically Created

What is the IMI tax exemption under Article 44(1)(n) of the Estatuto dos Benefícios Fiscais (EBF)?
Article 44(1)(n) of the Estatuto dos Benefícios Fiscais provides IMI exemption for 'individually classified immovable property' of public interest. The provision's scope changed with Decree-Law 108/2008, which shifted from exempting 'all immovable property forming part of a certain urban ensemble of public interest' to 'individually considered immovable property.' The central interpretive dispute concerns whether properties located within urban ensembles classified by the Ministry of Culture under Law 107/2001 automatically qualify for exemption, or whether each property unit must receive individual classification. The Tax Authority maintains that the exemption requires specific classification of the property itself, not merely inclusion within a classified ensemble, arguing that urban ensembles are not 'properties' under civil or tax law definitions.
Can property owners challenge IMI tax assessments through CAAD arbitration proceedings?
Yes, property owners can challenge IMI tax assessments through CAAD (Centro de Arbitragem Administrativa) arbitration proceedings under Article 2(1)(a) of the Legal Regime for Tax Arbitration (LRTA). Process 354/2017-T demonstrates this mechanism, where the claimant filed a request for constitution of a sole arbitral tribunal seeking declaration of illegality of an IMI assessment and recognition of compensatory interest rights. The CAAD Ethics Council appoints arbitrators, and proceedings follow the LRTA framework. However, taxpayers must consider potential procedural complications, such as prejudicial questions arising from parallel administrative court proceedings addressing related issues like exemption rejection decisions, which may affect arbitration jurisdiction and timeline.
What constitutes a preliminary question (questão prejudicial) in IMI tax disputes before CAAD?
A preliminary question (questão prejudicial) in IMI tax disputes before CAAD arises when resolution of the arbitration depends on deciding a prior legal issue pending in another proceeding. In Process 354/2017-T, the Tax Authority argued that the claimant's pending administrative court action challenging the exemption rejection decision constituted a prejudicial question, since the assessment's legality depends on the underlying exemption decision's validity. The Authority contended this relationship creates a 'legal-logical antecedent' requiring suspension of arbitration proceedings until the administrative court resolves the exemption question. Prejudicial questions impact arbitration competence and procedural progression, potentially requiring tribunals to suspend proceedings pending resolution of the prior issue that logically precedes the disputed assessment.
How does the Portuguese Tax Authority process IMI exemption requests for autonomous property fractions?
Portuguese Tax Authority processes IMI exemption requests for autonomous property fractions by evaluating whether each unit meets statutory exemption criteria under the Estatuto dos Benefícios Fiscais. For Article 44(1)(n) exemptions involving classified properties, the Authority assesses whether the specific fraction qualifies as 'individually classified property' of public interest. The process involves examining property registry information, classification documentation from the Ministry of Culture, and determining whether classification extends to individual units or only to broader urban ensembles. When exemption requests are denied, the Authority issues formal rejection decisions, which taxpayers can challenge through administrative courts. Subsequent IMI assessments issued after exemption denial can be separately contested through tax arbitration (CAAD) or hierarchical review, though parallel proceedings may create prejudicial question issues.
Are taxpayers entitled to compensatory interest (juros indemnizatórios) when IMI is unlawfully collected?
Yes, taxpayers are potentially entitled to compensatory interest (juros indemnizatórios) when IMI is unlawfully collected, as claimed in Process 354/2017-T. Compensatory interest compensates taxpayers for improper payment of tax liabilities later determined illegal. Entitlement requires: (1) payment of tax subsequently declared unlawful; (2) attribution of the unlawful collection to the Tax Authority; and (3) damage from deprivation of funds. The interest accrues from the payment date until reimbursement. However, receiving compensatory interest depends on successfully proving the assessment's illegality—if the IMI assessment is upheld as lawful, no entitlement exists. The claimant's compensatory interest claim was cumulated with the illegality declaration request, following procedural economy principles allowing related claims in single arbitration proceedings under LRTA provisions.