Process: 356/2017-T

Date: February 21, 2019

Tax Type: Outros

Source: Original CAAD Decision

Summary

CAAD arbitral decision 356/2017-T addresses the IMI (Municipal Property Tax) exemption for heritage properties under Article 44(1)(n) of the Tax Benefits Statute (EBF). The claimant challenged an IMI assessment of €159.96 for 2016 on a property fraction within a classified urban ensemble. The key legal issue centered on interpreting 'individually classified properties' following the 2008 amendment to the EBF, which narrowed the exemption scope from all properties within heritage ensembles to only individually classified properties. The claimant argued that properties forming part of classified urban ensembles should still qualify for exemption, invoking principles of tax interpretation and legislative intent. The initial arbitral decision favored the claimant, annulling the IMI assessment and ordering reimbursement with compensatory interest. However, the Tax Authority appealed to the Central Administrative Court South (TCAS), which found a nullity due to omission of ruling on constitutional arguments regarding tax equality, fiscal justice, and local autonomy. The TCAS declared the arbitral decision null and ordered the case remanded to CAAD for a new decision addressing these omitted issues. This reformed decision demonstrates the appellate review mechanism in Portuguese tax arbitration, where administrative courts can identify procedural defects requiring correction. The case highlights critical interpretive questions about heritage property tax benefits and the scope of IMI exemptions following legislative changes that restricted benefits previously available to properties within classified urban ensembles to only individually designated monuments.

Full Decision

ARBITRAL DECISION

Following the Court of Appeal No. 17/18.9BCLSB delivered by the Central Administrative Court South and having become final on 12 November 2018, a new arbitral decision is hereby rendered.

REPORT

  1. On 6 June 2017, A..., taxpayer no. ..., with a tax representative resident at Street..., no. .... ..., in Porto, hereinafter referred to as the Claimant, requested the constitution of an arbitral tribunal and filed a request for arbitral determination, pursuant to section (a) of article 2(1) and section (a) of article 10(1) of Decree-Law No. 10/2011, of 20 January (Legal Framework for Arbitration in Tax Matters, hereinafter referred to only as RJAT), in which the Tax and Customs Authority (hereinafter referred to as AT) is the Respondent.

  2. The Claimant is represented in these proceedings by their representative, Dr. B..., and the Respondent is represented by the legal advisors, Dr. C... and Dr. D....

  3. The request for constitution of the arbitral tribunal was accepted by the Honourable President of the CAAD and was notified to the Respondent on 12 June 2017.

  4. By means of the request for constitution of the arbitral tribunal and for arbitral determination, the Claimant seeks to have declared the illegality of the act of assessment of Municipal Property Tax with no. 2016..., relating to the year 2016, in the amount of €159.96 (one hundred and fifty-nine euros and ninety-six cents) levied on the immovable property registered under article..., autonomous fraction designated by the letter "B", of the Union of Parishes of..., ..., ..., ..., ... and..., with its consequent annulment, and payment of compensatory interest.

  5. Having verified the formal regularity of the request presented, pursuant to section (a) of article 6(2) of the RJAT and as the Claimant did not proceed to nominate an arbitrator, the undersigned was appointed by the President of the Deontological Council of the CAAD.

  6. The Arbitrator accepted the appointment made, the arbitral tribunal having been constituted on 18 August 2017, at the headquarters of the CAAD, located at Avenida Duque de Loulé, no. 72-A, in Lisbon, as shown in the minutes of constitution of the arbitral tribunal which were drawn up and are attached to these proceedings.

  7. After being notified to do so, the Respondent filed its reply on 26 September 2017.

  8. Given the absence of any need for the production of additional evidence beyond that which has already been incorporated into the proceedings in documentary form, the process containing all the necessary elements for the rendering of the decision, for reasons of procedural efficiency and expedition, and the prohibition on performing useless acts, the Tribunal notified the parties, by order of 25 October 2017, to state their position on the possible waiver of holding the meeting provided for in article 18 of the RJAT and the production of submissions, and designated, in compliance with article 18(2) of the RJAT, 9 February 2018 as the date for the rendering of the arbitral decision, also warning the Claimant that payment of the subsequent arbitral fee should be made in accordance with article 4(3) of the Regulation of Costs in Tax Arbitration Proceedings, and that this payment should be communicated to the CAAD.

  9. On 26 October 2016, the Respondent filed a request in which, in response to the order identified in point 8, manifested its intention to waive the holding of the meeting provided for in article 18 of the RJAT, though not waiving the submission of written submissions.

  10. In light of such request, the Tribunal, by order of 17 November 2017, granted a period of 15 successive days for the Claimant and Respondent, in that order, to present their respective written submissions, and further determined that the Respondent's period would commence upon notification of the Claimant's submissions or upon expiry of the period for doing so.

  11. On 22 November 2017, the Claimant, by request, declared that it waived the opportunity to present submissions.

  12. The Respondent, on 29 November 2017, presented its submissions.

  13. On 8 February 2018, an arbitral decision was rendered to the effect of "judging the request filed by the Claimant as well-founded (...) as to the illegality of the act of assessment of Municipal Property Tax relating to the year 2016, contained in the document no. 2016..., in the total value of €159.96 (one hundred and fifty-nine euros and ninety-six cents) to which it was subject, in relation to the immovable property registered under article...-B, fraction "B", of the Union of Parishes of..., ..., ..., ..., ... and ..." and, consequently, "judge as well-founded the request condemning the Tax and Customs Authority to reimburse to the Claimant the amount of tax paid, plus compensatory interest in accordance with legal provisions, from the date on which such payment was made until the date of complete reimbursement of the same" and condemn the Respondent to pay the arbitral costs.

  14. The Respondent, dissatisfied with the aforementioned arbitral decision, appealed the same to the Central Administrative Court South (TCAS), arguing that the same "suffers from nullity by reason of having omitted to rule on three matters on which it should have ruled [article 28(1)-c), second part of the RJAT]"

  15. The Central Administrative Court South judged, on 11 October 2018, "the (...) challenge as well-founded", declared "null the arbitral decision rendered (...)" and consequently ordered "the remand of the case to the Administrative Arbitration Centre", on the understanding that it suffers from an omission to rule on one of the three matters raised by the Respondent which relates to the "interpretation put forward by the respondent, concerning the assessment of Municipal Property Tax, subject matter of the proceedings, violating the principles of tax equality, fiscal justice, contributive capacity, local autonomy and participation in decision-making, and suffering from organic unconstitutionality".

  16. This Arbitral Tribunal became aware of the contents of the aforementioned Court of Appeal (rendered by the TCAS) on 5 December 2018 (date of the reopening of the case in the CAAD).

II. The Claimant supports its request, in summary, as follows:

The Claimant supports the request for annulment of the assessments of Municipal Property Tax (IMI) relating to the year 2016, contained in the document no. 2016..., in the total value of €159.96 (one hundred and fifty-nine euros and ninety-six cents) to which it was subject, in relation to the immovable property registered under article...-B, fraction "B", of the Union of Parishes of..., ..., ..., ..., ... and..., as illegal, as it suffers from the following defects:

a) Error regarding the factual and legal assumptions, insofar as the Claimant understands that "[s]ection n) of article 44(1) of the EBF establishes that exempt from Municipal Property Tax are 'immovable properties classified as national monuments and immovable properties individually classified as being of public interest or municipal interest, in accordance with applicable legislation.' In the previous wording, the provision covered all immovable properties that formed part of a given urban ensemble of public interest, and only with Decree-Law No. 108/2008, of 26 June, did the legislator start to refer to individually classified immovable properties. Without clarifying the meaning of the expression 'individually classified immovable properties' (...) Thus, as the Tax Benefits Statute [also] does not give us the concept of individually classified property, it must be filled in accordance with the general rules and principles of interpretation and application of laws (see article 11 of the LGT)."

b) The Claimant continues, in this sense, by noting that: "reconstituting the legislative intent, we believe that the legislator did not wish to exclude from the tax benefit all immovable properties that form part of an urban ensemble, but solely those immovable properties that, not forming part of an urban ensemble, and by themselves individually could not be classified by the supervising Ministry (Ministry of Culture). For otherwise, there would be no possibility of classification of immovable properties as being of public interest. This possibility stems from the fact that the Ministry of Culture, under the Cultural Heritage Framework Law, Law No. 107/2001, of 8 September, only grants classification to urban ensembles. Never granting the classification of immovable cultural properties of public interest to individual immovable properties that are not monuments, as the AT claims."

c) The Claimant continues, noting that "[i]n the scenario under examination, the Ministry of Culture, under the Cultural Heritage Framework Law, granted to the ensemble designated as the Historic Centre of Porto, the classification of national monument, included in the UNESCO World Heritage list on 05.12.1996 (...), since it is an urban agglomeration that embodies an ensemble with cultural interest that demarcates a specific geographical circumscription of the city of Porto, and the article...-B, of the Union of Parishes of..., ..., ..., ..., ... and..., is an integral part of that immovable property, with the designation of ensemble of public interest, moving away from the concept of immovable property for purposes of heritage classification, from the legal concept of property (as rural or urban real estate), whereby, (...) having demonstrated that the ratio legis of article 44(1) section n) of the EBF points in the direction that the expression individually classified property, by reference to the Cultural Heritage Framework Law should be interpreted as monument, site or urban ensembles, the illegality of the act of assessment of Municipal Property Tax should be recognized."

d) The Claimant further adds that "(...) the classification of the immovable property on an individual basis is not provided for in the Cultural Heritage Framework Law. Considering that residential ensembles, alongside monuments, constitute a category of property defined in light of international law, subsequently adopted by national law, according to which an architectural ensemble is defined as '(...) the grouping of urban or rural buildings, notable for their historical, archaeological, artistic, scientific, social or technical interest and sufficiently coherent to be the subject of topographical delimitation (...) concluding, thus, that also in compliance with the concepts of international law (...) the classification of an ensemble remains a classification of a single entity (...)', [it] should, for that reason, be subsumed within the scope of application of section n) of article 44(1) of the EBF."

e) Concluding thus, the Claimant to the effect that "in light of all that has been set forth, it is clear and evident that the AT erred in considering that the immovable property under examination does not have the quality of immovable property of public interest, without taking into account that according to the Cultural Heritage Framework Law, only urban agglomerations merit such qualification, albeit by reference to each of the immovable properties that comprise them, which, pursuant to article 99 of the Code of Tax Procedure and Process, generates its voidability. And, being voidable, it cannot remain in the Legal Order, which has thus been violated."

f) The Claimant finally requests, and consequently, payment of compensatory interest, given that "following the assessment of Municipal Property Tax, the claimant proceeded on 09.04.2017 to pay the tax that was debited to it" and "the reason for the assessment of the tax paid lies in the non-application in this case of the tax benefit of exemption from Municipal Property Tax, whereby error attributable to the services occurred", pursuant to articles 43 and 100, both of the LGT.

III. In its Reply the Respondent invoked, in summary, the following:

For its part, the AT comes in its reply to defend itself by impugning and invoking, on one hand, that:

a) "1st The LBPC establishes in article 15 three distinct legal-patrimonial concepts regarding immovable cultural property, namely: the Category (no. 1); the Classification (no. 2); and the Designation (no. 3); 2nd There are three Categories provided for in the LBPC (article 15/1): Monument, Ensemble and Site, and their definitions for what is relevant in the case sub judice are found in the 1972 UNESCO Convention; 3rd There are three Classifications provided for in the LBPC (article 15/2): National Interest, Public Interest and Municipal Interest organized in a scale of decreasing graduation; and 4th The designation of National Monument is reserved exclusively for monuments, ensembles or sites that are classified as being of National Interest (article 15/3).",

b) And, on the other hand, that "[i]n reality, similar to (almost) everything that has been discussed and written on this subject, the reasoning put forward by the Claimant throughout its initial submission is based on an erroneous legal assumption, namely the existence of a 'UNESCO classification'. Let us be clear: There is no UNESCO classification denominated 'Humanity's Heritage', 'UNESCO Heritage', 'World Heritage' or any equivalent expression." Indeed, the Respondent understands that "[t]he 'World Heritage List' referred to in article 11(2) of the 1972 UNESCO Convention and, therefore, the list referred to in article 15(7) of the LBPC is only and exclusively that: a list, a list that is in charge of the World Heritage Committee. When the World Heritage Committee inscribes a cultural property on the 'World Heritage List', the World Heritage Committee of UNESCO is not classifying a property (...) it is, rather, recognizing that that cultural property also 'constitutes a universal heritage for the protection of which the international community as a whole has the duty to cooperate.'"

c) In this sequence, the Respondent further states that "as is known, the classification of a cultural property always depends on a prior administrative classification procedure. This is evident and undeniably clear: from article 1 of the Code of Administrative Procedure (...); from article 18 of the LBPC (...) and from article 1 of Decree-Law No. 309/2009, of 23 October (commonly known as Procedure for Classification of Immovable Property) (...)"

d) Continuing its reasoning, the Respondent further argues that: "Now, when inscribing the Historic Centre of Porto on the 'World Heritage List' the World Heritage Committee of UNESCO NEVER carried out any prior administrative classification procedure (...), as indeed, regarding all Portuguese cultural properties that are part of that list, because, as is obvious, the World Heritage Committee of UNESCO does not even form part of the Portuguese Public Administration. Moreover, NEVER did the Portuguese State delegate to the UNESCO World Heritage Committee the performance of an administrative classification procedure regarding the Historic Centre of Porto (...) as indeed regarding all Portuguese cultural properties that are part of that list). On the other hand, the Portuguese State itself NEVER proceeded to open any administrative classification procedure prior to the nomination of the Historic Centre of Porto for inscription on the 'World Heritage List' (...)."

e) "In summary, the inscription of a cultural property on the 'World Heritage List' does not constitute any classification, as this necessarily presupposes the existence of a prior administrative procedure; that inscription 'merely' amounts to the attribution of a new honorary status to the property in question: from national cultural property it becomes (also) a worldwide cultural property. Therefore, it is reaffirmed: there is no UNESCO classification denominated 'Humanity's Heritage', 'UNESCO Heritage', 'World Heritage' or any equivalent expression (...)"

f) Regarding the classification of the Historic Centre of Porto, the Respondent considers that the same "(...) necessarily results from the articulation of three legal instruments: Notice No. 15.173/2010, of 30 July (...); the LBPC; and Decree-Law No. 309/2009, of 23 October." Thus, "[f]irst, Notice No. 15.173/2010 establishes that the Historic Centre of Porto falls within the category of Ensemble. (...) Secondly, Notice No. 15.173/2010 came to grant some efficacy to the decision of the UNESCO World Heritage Committee, in that it came to publicize in 2010, in the official journal of the Portuguese Republic, a decision taken in 1996 by an entity that does NOT form part of the Portuguese Public Administration; (...) Thirdly (...), it directly results from article 15(7) of the LBPC that cultural properties inscribed on the 'UNESCO World Heritage List' will, at best, be classified as immovable properties of National Interest."

g) Referring to the content of article 15(7) of the LBPC, the Respondent states that "[f]rom this it follows that there is NO classification denominated as National Monument, but only classifications denominated as National Interest, Public Interest or Municipal Interest, therefore it is manifestly impossible to assert, as the Claimant does, that the Historic Centre of Porto is classified as a National Monument. Therefore, in light of article 15(7) of the LBPC, the Historic Centre of Porto is, at best, classified, with one of the three possible graduations (article 15(2) of that statute)."

h) "[f]ourthly, it is finally clear and unequivocally established by law, that the so-called Historic Centre of Porto enjoys the designation of National Monument, as a result, also here not of a decision by the competent authority, but as a direct result of law (ope Legis), for it is the latter that orders its attribution, without more, of such classification (article 15(2) and 3, by reference to article 15(7), both of the LBPC, articulated with article 72(1) of Decree-Law 309/2009)."

i) The Respondent further argues in this regard that: "[w]hile a cultural property inscribed on the 'UNESCO World Heritage List', the so-called Historic Centre of Porto is, at best, classified as an immovable property of National interest, designated as a National Monument. And in that sense, the EBF is very clear in the 2nd and 3rd segment of article 44(1) section n) (...) that is to say, in order to be able to benefit from the exemption from Municipal Property Tax the EBF requires the individual classification of each of the properties that make up that Ensemble."

j) Concluding to the effect that "(...) having the Claimant not demonstrated, either within the scope of the administrative procedure that preceded the issuance of the assessment or in the present arbitral process, that its urban property is individually classified as a National Monument, it must be concluded that it does not meet the requirements to benefit from the tax benefit set forth in article 44(1)-n) of the EBF, and that consequently, the tax act sub judice is in line with the law."

k) The Respondent further invokes, regarding the inseparability of the exemption sub judice from the tax concept of property that: "(...) beyond all evidence that the ensemble designated as Historic Centre of Porto does not constitute a property, but rather a Universal composed, in fact, of thousands of properties. Consequently, the exemption evident in article 44(1)-n) of the EBF, because it can only be directed at tax properties (article 2 of the Municipal Property Tax Code), requires the individual classification of properties regardless of the heritage Category in which they fall (i.e. Monument, Ensemble, Site)." Thus, "(...) it must be concluded that the assessment now challenged has factual and legal support, and should therefore remain in the legal order."

l) The Respondent further defends that the documents attached to the proceedings by the Claimant are not capable of demonstrating that the property in question is classified. Further noting that the General Directorate of Cultural Heritage ("DGPC") and its regional offices (in this case, the Regional Directorate of Culture of the North) is the competent administrative authority regarding cultural heritage and responsible for the procedures for classification of cultural properties. Only the General Directorate of Cultural Heritage could certify that the property in question here is classified in light of the LBPC, as can be inferred from article 44(5) and (6) of the EBF."

m) Finally, the Respondent defends that the "interpretation put forward by the Claimant shows itself to be contrary to the Constitution of the Portuguese Republic ('CRP'), in that it violates the constitutional principles: (i) of tax equality; (ii) of fiscal justice, (iii) of contributive capacity, (iv) of local autonomy and (v) of participation in decision-making." Thus, "the interpretation proposed by the Claimant is an interpretation that offends the fundamental principle of tax equality (article 13 of the CRP), in that, as owner of an urban property integrated in the so-called Historic Centre of Porto, devoid of individual cultural value (i.e. property that dates from 2016), as above was demonstrated, the Claimant seeks to be privileged, without justifiable reason, in relation to the remaining owners of non-classified immovable properties."

n) "Equally, the interpretation given by the Claimant is offensive to the principle of contributive capacity (article 104 of the CRP), since, as owner of an urban property devoid of individual cultural value, it seeks to benefit from a tax exemption intended to benefit owners of properties that effectively possess cultural value and that are subject to financial burdens and more burdensome bureaucratic procedures than owners of recently built properties."

o) "On the other hand, it subverts the principle of justice in the distribution of the tax burden (article 103 of the CRP) and seeks to benefit from an exemption relating to an urban property devoid of individual cultural value solely and only because it is located within the urban fabric of the so-called Historic Centre of Porto."

p) "Finally, the argument put forward by the Claimant represents a violation of the principle of local autonomy, insofar as it results in the attribution of a tax benefit without any criterion, with obvious prejudice to municipal revenues, since – and it is important here not to forget this essential aspect, but so often neglected – the Municipal Property Tax is, as its very name indicates, a municipal tax whose revenues revert in favour of the municipality where the immovable properties are located (see article 1 of the Municipal Property Tax Code), and not in favour of the Respondent."

q) Concluding on this matter to the effect that "[i]ndeed, if one were to follow the understanding put forward by the Claimant, according to which the urban property sub judice is integrated in the 'World Heritage List' of UNESCO as the Historic Centre of Porto and that, as such, is classified, then it must be concluded that, if this were the case, the Municipality of Porto sees its local autonomy (articles 235 and 238 of the CRP) impaired in that it had no say regarding the issue of loss of Municipal Property Tax revenue relating to the area of the Historic Centre of Porto."

IV. Screening

The Tribunal is competent and is regularly constituted, pursuant to section (a) of article 2(1) and articles 5 and 6, all of the RJAT.

The parties have legal standing and capacity, are shown to be legitimate, are regularly represented and the case does not suffer from any nullities.

V. Factual Matters

With relevance for the decision, the following facts are taken as proven:

A. The Claimant, in the year 2016, was the owner of the autonomous fraction designated by the letter "B" of the urban immovable property registered in the urban property register under article ... of the Union of Parishes of..., ..., ..., ..., ... and ... . (see Doc. No. 1 attached to the initial petition and consultation carried out on 06.02.2018 to the respective property register contained in the Tax Portal);

B. The immovable property, identified in 1. above, of the Historic Centre of Porto, is part of the UNESCO World Heritage list, pursuant to Notice No. 15173/2010, published in the Official Journal, no. 147, of 30 July 2010 (see Doc. No. 3 attached to the initial petition);

C. The Municipal Division of Museums and Cultural Heritage of the Porto City Council issued, on 28.03.2017, information with reference to the immovable property identified in 1. above, within the scope of process no. .../17/CMP, to the effect that "[t]he fraction in question is part of a property located in the ensemble designated as the Historic Centre of Porto, included in the 'World Heritage' list by UNESCO on 5 December 1996 (see 'Report of the 20th Session of the World Heritage Committee') which Portuguese Legislation recognizes as 'National Monument' (Notice No. 15173/2010_OR, no. 147, 2nd series, of 30/07/2010), whereby it is marked as MN19 in the Conditions Map of the Municipal Master Plan of Porto in force (Resolution of the Council of Ministers No. 19/2006, published in the Official Journal, 1st series-B, no. 25, of 3 February, amended by Notice No. 14332/2012, published in the Official Journal, 2nd series, no. 207, of 25 October). Furthermore, as it falls within the remit of this office to issue certificates of 'Classified Immovable Property of Municipal Interest', this situation is not verified in the present case." (see Doc. No. 2 attached to the initial petition);

D. The Claimant was notified to proceed with the payment of the sole instalment of the act of assessment of Municipal Property Tax relating to the year 2016, in the amount of €159.96, with payment deadline in April 2017. (see Doc. No. 1 attached to the initial petition);

E. The Claimant proceeded to pay the act of assessment underlying the arbitral petition on 9 April 2017.

VI. Facts Taken as Not Proven

There are no facts taken as not proven, because all facts relevant for the appraisal of the request were taken as proven.

VII. Justification for the Factual Matters Taken as Proven

For the conviction of the arbitral tribunal regarding the facts proven, the documents attached to the proceedings analyzed and weighed in conjunction with the pleadings were relevant, from which agreement results regarding the factuality presented by the Claimant in the request for arbitral determination.

VIII. Issue to be Decided

In light of the foregoing in the previous numbers, there are two disputed issues in the present proceedings, namely:

a) to determine whether the tax act assessing Municipal Property Tax (IMI), relating to the year 2016, is illegal, insofar as the urban property where the fraction belonging to the Claimant is located is classified as a National Monument as a consequence of it being inserted within the ensemble commonly designated as the Historic Centre of Porto, considered World Heritage by UNESCO in 1996, and if, for that reason, such property meets the requirements established by law to benefit from the exemption from Municipal Property Tax enshrined in article 44(1), section n) of the EBF;

b) to determine whether the interpretation put forward by the Claimant, concerning the assessment of Municipal Property Tax under challenge violates the principles of tax equality, fiscal justice, contributive capacity, local autonomy and equality in decision-making, along with suffering from organic unconstitutionality.

IX. Legal Grounds

A. CLASSIFICATION OF PROPERTIES

  1. We shall now determine the law applicable to the facts underlying the issue already stated (see above VIII).

  2. Article 44(1) section n) of the EBF establishes that exempt from Municipal Property Tax are "immovable properties classified as national monuments and immovable properties individually classified as being of public interest or municipal interest, in accordance with applicable legislation".

  3. This article is composed of two provisions. First, exempt from Municipal Property Tax are immovable properties classified as national monuments. Secondly, exempt from the same tax are immovable properties individually classified as being of public interest or municipal interest.

  4. Given the reference to applicable legislation contained in the aforementioned provision of article 44(1) section n) of the EBF, it is necessary to take into account Law 107/2001, of 8 September – Cultural Heritage Framework Law –, more specifically its article 15, according to which:

"1 - Immovable cultural properties may belong to the categories of monument, ensemble or site, as such categories are defined in international law, and movable properties, among others, to the categories indicated in title VII.

2 - Movable and immovable cultural properties may be classified as being of national interest, public interest or municipal interest.

3 - For immovable cultural properties classified as being of national interest, whether they are monuments, ensembles or sites, the designation 'national monument' shall be adopted and for movable cultural properties classified as being of national interest the designation 'national treasure' is created.

4 - A property is considered to be of national interest when its respective protection and enhancement, in whole or in part, represents a cultural value of significance for the Nation.

(...)

7 - Immovable cultural properties included in the world heritage list integrate, for all purposes and in their respective category, the list of properties classified as being of national interest."

  1. For its part, the Convention for the Protection of the World Cultural and Natural Heritage, which took place in Paris, and was approved by Decree No. 49/79, of 6 June, sought to establish which natural and cultural properties could come to be inscribed on the World Heritage List, setting out the duties of Member States regarding the identification and protection of such properties. In this sequence, various monuments, sites or ensembles came to obtain the classification of UNESCO World Heritage. Highlighted, in particular, are the ensembles classified, more specifically, the Historic Centres classified as UNESCO World Heritage, as is the case of the Historic Centre of Porto.

  2. It is noteworthy that the said ensembles classified as World Heritage benefited, for several years, from exemption from Municipal Property Tax, under the combined provisions of articles 44(1) section n) of the Tax Benefits Statute and 15(2), (3) and (7) of Law No. 107/2001, of 8 September (Cultural Heritage Protection Framework Law).

  3. As already referred to, articulating the aforementioned provisions, the immovable properties situated in Historic Centres included in the UNESCO World Heritage List are classified as being of national interest, falling within the category of "National Monuments" and, consequently, benefiting from the exemption enshrined in section n) of article 44(1) of the EBF.

  4. This formulation came to be reiterated in Decree-Law No. 309/2009, of 23 October – Immovable Cultural Heritage –, which establishes the procedure for classification of immovable cultural properties of interest, as well as the regime of protection zones and the detailed conservation plan. In accordance with its article 3(1) "an immovable property may be qualified as being of national interest, public interest or municipal interest", adding article 3(3) that "the designation 'national monument' is attributed to immovable cultural properties classified as being of national interest, whether they are monuments, ensembles or sites".

  5. The fact that individually classified properties may coexist, in the case of delimitation of an ensemble or a site, pursuant to article 56 of Decree-Law No. 309/2009, only has provisional relevance for delimiting the protection zone of that immovable property until publication of the classification of the ensemble or the site.

  6. For that reason it is understood why article 44 of the EBF distinguishes between "property classified as a national monument" and "property individually classified as being of public or municipal interest", only requiring individualization in relation to these latter two categories, and not regarding properties of national interest.

  7. As for the argument that some authors defend a restrictive interpretation of exemptions to classified immovable properties, with the intent to exclude from the benefits attributed under Municipal Property Tax or Immovable Transfer Tax all situations in which there has been no procedure or act of individual classification as a national monument, immovable property of public or municipal interest, which is why article 6 section g) of the Immovable Transfer Tax Code was amended in that sense by Law 55-A/2010, of 31 December, leading to the exemption ceasing to cover "the acquisitions of properties classified as being of national interest, public interest or municipal interest, under Law No. 107/2001, of 8 September" to pass to contemplate only "the acquisitions of properties individually classified as being of national interest, public interest or municipal interest, in accordance with applicable legislation", we understand that this argument does not prevail either.

  8. Indeed, it would hardly make sense, since the wording of article 44 of the EBF was not amended in the same sense, continuing to require individual classification for grant of the exemption only in the case of public or municipal interest immovable properties, but not making such requirement for national monuments. On the contrary, the provision of article 44(5) of the EBF states that "the exemption referred to in section n) of no. 1 is of an automatic character, operating by means of communication of the classification as national monuments or of individualized classification as immovable properties of public or municipal interest (...)"

  9. Thus, truly, we understand it to be clear that the intention of the legislator was to dispense with individual classification for purposes of exemption from Municipal Property Tax for national monuments, only requiring it in relation to properties of public or municipal interest.

  10. The immovable property in question in the present proceedings is part of the Historic Centre of Porto, which was inscribed on the UNESCO World Heritage List, as declared by Notice no. 15173/2010, published in the Official Journal, II Series of 30 July 2010, issued under article 72(3) of Decree-Law 309/2009, of 23 October (see proven fact B)).

  11. And, as results from the information issued by the Municipal Division of Museums and Cultural Heritage of the Porto City Council – Doc. No. 2 attached with the request for arbitral constitution - "[t]he fraction in question is part of a property located in the ensemble designated as the Historic Centre of Porto, included in the 'World Heritage' list by UNESCO on 5 December 1996 (...) which Portuguese legislation recognizes as 'National Monument' (Notice No. 15173/2010:OR, no. 147, 2nd series, of 30/07/2010) whereby it is marked as MN19 in the Conditions Map of the Municipal Master Plan of Porto in force (Resolution of the Council of Ministers No. 19/2006, published in the Official Journal, 1st series-B, no. 25, of 3 February, amended by Notice No. 14332/2012, published in the Official Journal, 2nd series, no. 207, of 25 October)." (see proven fact C). (emphasis added)

  12. Thus being, with due respect, the Respondent's argument that the documents attached to the proceedings by the Claimant are not capable of demonstrating that the property in question is classified as a "national monument" lacks merit, insofar as such classification is found, not only in the information issued by the Municipal Division of Cultural Heritage of the Porto City Council (see Doc. No. 2 attached with the request for arbitral constitution), which recognizes it as such, but also in national legislation.

  13. In this sense, the decisions of the CAAD of processes no. 325/2014-T, 76/2015-T, 33/2016-T, 98/2016-T, 379/2016-T, 534/2016-T and 204/2017-T have already ruled, and we agree with them in their entirety.

  14. Indeed and of relevance, it is important to note that this has equally been the position of the Central Administrative Courts (North and South), and particularly, by being applicable to the case in hand, we shall cite what is held in the Court of Appeals of the TCA North, rendered in processes no. 0063/14.1BEPRT, of 01.06.2017 and no. 00134/14.42BEPRT, of 07.12.2016, the summary of the latter of which states:

"1 - Exempt from municipal property tax are: immovable properties classified as national monuments and immovable properties individually classified as being of public or municipal interest, in accordance with applicable legislation – see article 44(1) section n) of the Tax Benefits Statute.

2 - Immovable properties situated in Historic Centres included in the UNESCO World Heritage List are classified as being of national interest, falling within the category of 'national monuments' – see article 15(3) and (7) of Law No. 107/2001, of 8 September.

3 - Properties inserted in Historic Centres Classified benefit from exemption from municipal property tax."

  1. Thus, and as concluded in the decision of the CAAD of process no. 76/2015-T, being the property in question integrated in the Historic Centre of Porto, (as well as in the Court of Appeals of TCA North identified above) legally qualified as a national monument, it is manifest that it benefits from the said exemption, and thus the assessment of Municipal Property Tax here challenged is illegal, and the tax paid should be reimbursed to the Claimant.

B. OF THE ALLEGED UNCONSTITUTIONALITY OF THE INTERPRETATION PUT FORWARD BY THE CLAIMANT

  1. The Respondent invokes in its reply the defect of unconstitutionality on the grounds that the "interpretation put forward by the Claimant shows itself to be contrary to the Constitution of the Portuguese Republic ('CRP'), in that it violates the constitutional principles: (i) of tax equality; (ii) of fiscal justice, (iii) of contributive capacity, (iv) of local autonomy and (v) of participation in decision-making."

Now, let us see,

  1. As regards the alleged violation of the principle of tax equality, the Respondent manifests the understanding that "the interpretation proposed by the Claimant is an interpretation that offends the fundamental principle of tax equality (article 13 of the CRP), in that, as owner of a property integrated in the so-called Historic Centre of Porto, devoid of individual cultural value (i.e. property that dates from 2016)(...) the Claimant seeks to be privileged, without justifiable reason, in relation to the remaining owners of non-classified immovable properties. (...) In the case sub judice, the Respondent raises the violation of the principle of equality before fiscal law, in the dimension of the obligation of differentiation, in the interpretation given by the Claimant." (articles 208 and 216 of the learned reply).

  2. As the Respondent rightly states in its learned reply, "the principle of equality is one of the fundamental principles of the Portuguese constitutional system, finding general consecration in article 13 of the CRP." (article 209 of the learned reply).

  3. Indeed, article 13 of the CRP provides that "all citizens have the same social dignity and are equal before the law", which means that this principle determines that what is equal should be treated equally and what is different should be treated differently to the extent of the difference.

  4. It happens that, in the case in question we are dealing with an immovable property that is situated in the Historic Centre of Porto, which is included in the UNESCO World Heritage List, a fact which, by itself, confers on the same a high cultural value (anticipating already the response to what shall follow below regarding the alleged violation of the principle of contributive capacity.) – something that does not occur with immovable properties that are not in the same conditions.

  5. Now, pursuant to article 15(7) of the LBPC, immovable cultural properties included in the world heritage list integrate, for all purposes and in their respective category, the list of properties classified as being of national interest.

  6. Furthermore, and notwithstanding the property being inserted in an ensemble, the fact is that for immovable cultural properties classified as being of national interest, whether they are monuments, ensembles or sites, they are all considered "national monuments".

  7. In this conformity, the equal treatment of the owner of the property in question will tend to be assessed in relation to the owners of all other properties inserted in the Historic Centre of Porto, and not as the Respondent argues in relation to properties not inserted in that Historic Centre or that are not classified as "national monuments", whereby, as the arguments put forward by the Respondent are devoid of foundation, the alleged unconstitutionality necessarily fails, by violation of the principle of tax equality.

  8. As regards the alleged violation of the principle of contributive capacity, the Respondent states that "as owner of an urban property devoid of individual cultural value, it seeks to benefit from a tax exemption intended to benefit owners of immovable properties that effectively possess cultural value and that are subject to financial burdens and more burdensome bureaucratic procedures than owners of recently built properties" (article 217 of the learned Reply);

  9. ... adding, in support, as grounds for violation of the principle of justice in the distribution of the tax burden, given the Respondent's understanding that "seeking to benefit from an exemption relating to an urban property devoid of individual cultural value and solely because it is located within the urban fabric of the so-called Historic Centre of Porto" subverts such principle.

  10. Now, the Respondent's argument in relation to this defect hinges essentially on the question of the cultural value of the property in question.

  11. As already referred to above, the mere fact that the property in question is situated in the Historic Centre of Porto, and consequently in the UNESCO World Heritage List, leads to asserting with certainty that it has high cultural value.

  12. On this matter, we can consult the Court of Appeal of the Central Administrative Court North rendered in process no. 01480/14.2BEPRT, of 04.05.2017 which this Arbitral Tribunal follows and on which it relies, and which clarifies the following:

"The principle of equality before public burdens results from the need to impose patrimonial sacrifices, which concerns everyone, affecting equally the spheres of all citizens, with identical contributive capacity. That is, this principle requires that the sacrifices inherent to the satisfaction of public needs be equitably distributed among all citizens; all citizens should contribute equally to public burdens in proportion to their contributive capacity. Indeed, it is not proven that, concretely, the Respondent, as owner of the immovable property, is not subject to special rules and impositions because the same is inserted in the Historic Centre of Porto, namely, that it does not bear burdens related to the conservation and restoration of that property, which cannot fail to be termed as cultural, insofar as it is integrated in the said ensemble. We judge it pertinent the counter-allegation by the Respondent on this matter: '(...) bearing in mind concretely the tax benefit now in question, the same carries limiting contraindications that curtail the autonomy of the owners of the said properties, who find themselves limited in their action as owners, especially as regards the execution of works on the properties in question. Which becomes understandable because it is a matter of world heritage. (...)'We reiterate, therefore, that it results clear that the immovable property of the Respondent is in a position of equality in relation to all the remaining properties inserted in the Historic Centre of Porto. Therefore, all owners of properties integrated therein will benefit, equally, from the tax benefit in question, not being glimpsed the disrespect of the principle of contributive capacity, given that it was not proven that the Respondent, concretely, is not subject to financial burdens and more burdensome bureaucratic procedures than other owners of properties not inserted in the ensemble. On the other hand, it was also not established that the faculties of disposition, transformation and enjoyment of the Respondent, concretely as regards its immovable property inserted in the classified ensemble, are different from those permitted to the owner of an individually classified property; whereby it shows itself impossible to assess the alleged subversion of the principle of justice in the distribution of the tax burden."

  1. Now, taking advantage of the aforementioned legal reasoning with the adaptation appropriate to the concrete case, and observing, on one hand, that the immovable property in question has high cultural value by virtue of being situated in the Historic Centre of Porto, as already referred to;

  2. ... on the other, that it is not proven, in the present proceedings, that the Claimant is not subject to financial burdens and more burdensome bureaucratic procedures than the other owners of immovable properties not inserted in the ensemble, and,

  3. ... finally, that it is equally not established that the faculties of disposition, transformation and enjoyment of the Claimant, concretely as regards its immovable property inserted in the classified ensemble, are different from those permitted to the owner of an individually classified property,

  4. ... this Arbitral Tribunal understands that, in the concrete case, it shows itself impossible to assess the alleged subversion of the principle of just distribution of the tax burden, as put forward by the Respondent, and thus the alleged defect of violation of the principle of contributive capacity fails for the reasons referred to.

  5. Regarding the alleged defect of the principle of local autonomy, the Respondent invokes that "the argument put forward by the Claimant represents a violation of the principle of local autonomy, insofar as it results in the attribution of a tax benefit without any criterion, with obvious prejudice to municipal revenues, since – and it is important not to forget this essential aspect, but so often neglected – the Municipal Property Tax is, as its very name indicates, a municipal tax whose revenues revert in favour of the municipalities where the immovable properties are located (...) and not in favour of the Respondent. Indeed, if one were to follow the understanding put forward by the Claimant, according to which the urban property sub judice is integrated in the 'World Heritage List' of UNESCO as the Historic Centre of Porto and that, as such, is classified, then it must be concluded that, if this were the case, the Municipality of Porto sees its local autonomy (articles 235 and 238 of the CRP) impaired in that it had no say regarding the issue of loss of Municipal Property Tax revenue relating to the area of the Historic Centre of Porto."

  6. Continuing "In other words, the local autonomy of the Municipality of Porto and, therefore, part of its local revenue was determined all at once, indirectly decided by an organism (read World Heritage Committee of UNESCO) that does not form part of the organs of the Portuguese State; does not have any legal competence regarding taxation in Portuguese territory; was not delegated any legal competence regarding taxation by the Portuguese State within the scope of the nomination for the 'UNESCO World Heritage List'; was not delegated any legal competence regarding taxation by the Municipality of Porto within the scope of the nomination for the 'UNESCO World Heritage List'."

  7. The Respondent further refers, on that matter, that "[m]oreover, since the Municipality of Porto had no say regarding the issue of loss of Municipal Property Tax revenue relating to the area of the Historic Centre of Porto (...) it must be concluded that, via article 15(7) of the LBPC, the constitutional principle of participation (article 268(3) of the CRP) was disrespected, in casu in the sphere of the Porto municipality, in the formation of the decision of classification."

  8. Now, regarding this invoked defect, this Arbitral Tribunal understands that the same is entirely devoid of merit, given that the Respondent is not the Municipality of Porto – the entity that may see itself prejudiced by the said exemption.

  9. In truth, the Respondent's argument follows the path of defense of a third party that it itself refrained from defending.

  10. Indeed, this Arbitral Tribunal takes advantage of what is held in the Court of Appeal indicated in point 32 above, regarding this alleged defect, to the effect that: "(...) as the law indicates (article 44(5) of the EBF, in the wording given by Law No. 3-B/2010, of 28/04, referred to above), the recognition of the exemption in question is automatic and its communication is the responsibility of the Municipalities territorially competent, and alongside the proceedings there is a municipal office in which the Municipality of Porto affirms that the property owned by the Respondent here is exempt from Municipal Property Tax. Nor can it be said that the Municipality of Porto had no say regarding the issue of loss of Municipal Property Tax revenue, when there are abundant documents attached to the proceedings on this matter – see fls. 39 to 60 of the physical file.

In this conformity, once again, the evidence fails regarding the factual assumptions, given that the elements in the proceedings show, rather, participation, knowledge and 'recognition' by the Porto municipality of the exemption from Municipal Property Tax regarding the concrete situation; nor is it glimpsed that the interpretation made by the Respondent and by the Court 'a quo' suffer from the alleged unconstitutionality." to give as ill-founded the defect of violation of the principle of local autonomy invoked by the Respondent.

  1. Finally, the Respondent invokes Organic Unconstitutionality, to the extent that the Claimant ended up effecting an equivalence or equalization between the classifications provided for in Old Regime legislation and those provided for in the LBPC, that is, by equivalence between the classification National Monument (provided for in Decree 20.3985 of 1932) and the classification National Interest (provided for in article 15(2) of the LBPC), when such equivalence or equalization will necessarily have to result from parliamentary law or authorized government decree-law.

  2. Further stating that "[a]lthough the LBPC permits that development legislation may come to establish the rules necessary to effect, among others, the conversion of classifications (article 112(3) of that statute), the fact is that the decree-laws of development published to date do not provide for any mechanism pertaining to it (...) and as a direct consequence of this omission by the cultural legislator, the tax legislator of 2008 could not substitute itself for the cultural legislator when equating in article 44(1)-n) of the EBF the classification of National Interest introduced by the LBPC to the classification of National Monument provided for in Decree 20.985 of 1932; And the tax legislator of 2008 not being able to substitute itself for the cultural legislator, naturally also never can the interpreter of the Law and the judge do so, under penalty of obvious unconstitutionality, by violation of the reservation of law."

  3. Now, notwithstanding the matter of unconstitutionality of law being a matter of ex officio knowledge, the truth is that the Tribunal must confine itself to the concrete assessment of constitutionality, since the abstract assessment falls within the exclusive competence of the Constitutional Court, as results from article 281 of the CRP.

  4. It is not therefore precluded to raise the question of unconstitutionality of the norms that define the elements of taxation or exemption.

  5. Indeed, the ex officio nature of knowledge of unconstitutionality of norms equally results from the emanation of the principle of the conformative value of constitutional provisions, which shall prevail over other legal norms, when shown to be incompatible with them in the context of concrete assessment of constitutionality of legal norms, assessing, by challenge of facts or ex officio, the existence of unconstitutionality of the applicable norms in the concrete case submitted to judgment – see Court of Appeal of TCA South, of 21/09/2010, rendered in the scope of process no. 03872/10.

  6. Furthermore, it is necessary to take into account that what may and should be subject to concrete assessment of constitutionality by the Courts are norms and not any decisions, whether of a judicial or administrative nature, nor any possible interpretations that such decisions may make of such norms.

  7. Now, section a) of article 44(1) of the EBF expressly mentions that properties classified as national monuments are exempt from Municipal Property Tax – a provision that is verified by the interpreter of the law and/or judge.

  8. And article 15 of Law No. 107/2001, of 8 September and article 3 of Decree-Law No. 309/2009, of 23 October provide that a property classified as being of national interest is designated as a "national monument".

  9. In this sequence and recovering the excellent argument set forth in the Court of Appeal indicated in point 32 above, which this Arbitral Tribunal follows and adheres to:

"Thus, we understand that the parallel is made by the law itself in force, neither the Respondent nor the court having made any interpretation consisting of an equivalence or equalization between the classifications provided for in the legislation of the Old Regime and those provided for in the Cultural Heritage Framework Law (LBPC), that is, an equivalence between the classification of National Monument (provided for in Decree 20.3985 of 1932) and the classification of National Interest (provided for in article 15(2) of the LBPC). The Cultural Heritage Framework Law (Law No. 107/2001, of 8 September) establishes the bases of policy and the regime for protection and enhancement of cultural heritage and was drawn up by the Assembly of the Republic, pursuant to article 161(c) of the Constitution of the Portuguese Republic, to serve as general law of the Republic. In this conformity, the equivalence or equalization effected in article 15(3) of this Law does not suffer from organic unconstitutionality, insofar as it results from parliamentary law. It was the Assembly of the Republic itself that, in article 15(3) of the LBPC, expressly established that a property classified as being of national interest is a national monument".

  1. That Court of Appeal continues, with manifest relevance that "[i]n the development of the legal regime established by Law No. 107/2001, of 8 September, and pursuant to sections a) and c) of article 198(1) of the Constitution of the Portuguese Republic, the Government decreed, by Decree-Law No. 309/2009, of 23 October, that the designation of 'national monument' is attributed to immovable cultural properties classified as being of national interest, whether they are monuments, ensembles or sites – see article 3(3)." to conclude that: "[t]hus, an immovable property classified as being of national interest – see article 3(1) of Decree-Law No. 309/2009, of 23 October – is a national monument, for that is how it is legally designated – see article 3(3) of this Decree-Law and article 15(3) of the LBPC, nor is the alleged organic unconstitutionality glimpsed."

  2. Thus considering that the aforementioned legal exposition is applicable in its entirety to the case brought to the appraisal of this Arbitral Tribunal, and which this tribunal follows all the argument sustained therein, it understands that the alleged defect of organic unconstitutionality should fail.

  3. In light of the foregoing, this Arbitral Tribunal decides that all the defects and matter of alleged unconstitutionality put forward by the Respondent are ill-founded for lack of merit.

C. OF COMPENSATORY INTEREST

  1. The Claimant further requests that the right to compensatory interest be recognized, on the grounds of error attributable to the services.

  2. Article 43(1) of the LGT and article 61 of the Code of Tax Procedure and Process provide that compensatory interest is due when it is determined in a complaint or judicial challenge that there was error attributable to the services from which results the payment of tax debt in an amount exceeding that legally due.

  3. Error attributable to the administration is considered when the error is not attributable to the taxpayer and is based on erroneous factual assumptions that are not the responsibility of the taxpayer.

  4. Now, resulting from the tax acts challenged the obligation to pay tax exceeding that which would be due, compensatory interest is due in accordance with the legally foreseen terms, the legislator presuming, in these cases, in which the annulment of the assessment is verified, that a loss occurred in the sphere of the taxpayer by virtue of having been deprived of the patrimonial amount that had to be delivered to the State by virtue of an illegal assessment. Consequently, the taxpayer has the right to such compensation, independent of any allegation or proof of prejudice suffered.

  5. In the present case, it will be unquestionable that, following the establishment of the illegality of the act of assessment challenged, there will be grounds for reimbursement of the tax by force of the provision of article 43(1) of the LGT, and of article 100 of the LGT, necessarily passing through the restoration of the "situation that would exist if the tax act subject of the arbitral decision had not been made".

  6. Equally, it is understood that it will be free from doubt that the illegality of the act is attributable to the Tax and Customs Authority, which autonomously made it in an illegal manner.

  7. As regards the concept of "error", it has been understood that only in cases of annulments based on defects relating to the tax legal relationship will compensatory interest be due, such right not being recognized in the case of annulments due to procedural or formal defects.

  8. Thus being, being in the presence of a defect of violation of substantive law, which is embodied in error in the legal assumptions, attributable to the Tax and Customs Authority, the Claimant has the right to compensatory interest, in accordance with articles 43(1) of the LGT and 61 of the Code of Tax Procedure and Process, counted from payment of the tax until complete reimbursement of the said amount.

X. DECISION

In accordance with the foregoing, it is hereby decided:

A. To judge as well-founded the request filed by the Claimant in the present tax arbitral process, as to the illegality of the act assessing Municipal Property Tax relating to the year 2016, contained in the document no. 2016..., in the total value of €159.96 (one hundred and fifty-nine euros and ninety-six cents) to which it was subject, in relation to the immovable property registered under article...-B, fraction "B", of the Union of Parishes of..., ..., ..., ..., ... and..., and consequently, to annul the tax assessment here challenged;

B. To judge as well-founded the request condemning the Tax and Customs Authority to reimburse to the Claimant the amount of tax paid, plus compensatory interest in accordance with legal provisions, from the date on which such payment was made until the date of complete reimbursement of the same.

C. To judge as ill-founded all the constitutional defects invoked by the Respondent, for lack of merit.

XI. VALUE OF THE PROCEEDINGS

The value of the proceedings is fixed at €159.96, pursuant to article 97-A(1) a) of the Code of Tax Procedure and Process, applicable by force of sections a) and b) of article 29(1) of the RJAT and article 3(2) of the Regulation of Costs in Tax Arbitration Proceedings.

The amount of costs is fixed at €306.00, pursuant to Table I of the Regulation of Costs of Tax Arbitration Proceedings, to be paid by the Tax and Customs Authority, since the request was entirely well-founded, pursuant to articles 12(2) and 22(4), both of the RJAT, and article 4(4) of the aforementioned Regulation.

Let notification be made.

Lisbon, 21 February 2019

The Arbitrator

(Jorge Carita)

Frequently Asked Questions

Automatically Created

What is the IMI tax exemption for properties classified as national monuments or properties of public or municipal interest under Article 44(1)(n) of the EBF?
Article 44(1)(n) of the EBF provides IMI exemption for properties classified as national monuments and properties individually classified as being of public or municipal interest. Following Decree-Law 108/2008 of 26 June, the exemption was restricted to individually classified properties, excluding properties that merely form part of classified urban ensembles without individual classification. The interpretation of 'individually classified' requires reference to heritage protection legislation and must align with general tax law principles under Article 11 of the General Tax Law (LGT).
How does the CAAD arbitral tribunal process work for challenging IMI tax assessments in Portugal?
The CAAD arbitral tribunal process for challenging IMI assessments begins with filing a request for arbitral determination under Articles 2(1)(a) and 10(1)(a) of the RJAT (Decree-Law 10/2011). An arbitrator is appointed, the Tax Authority files a reply, and parties may waive the oral hearing in favor of written submissions. The arbitrator renders a decision within the statutory timeframe. If either party is dissatisfied, they may appeal to the Central Administrative Court South, which can annul the decision for legal errors or procedural defects and order reformation by the arbitral tribunal.
What was the outcome of CAAD arbitral decision 356/2017-T regarding the IMI exemption for classified heritage properties?
The initial CAAD decision in case 356/2017-T favored the claimant, annulling the €159.96 IMI assessment for 2016 and ordering reimbursement with compensatory interest. However, the Central Administrative Court South declared this decision null on 11 October 2018 due to omission of ruling on constitutional arguments raised by the Tax Authority regarding violation of principles of tax equality, fiscal justice, contributive capacity, and local autonomy. The case was remanded to CAAD for a new decision addressing these omitted issues.
What is the legal basis for reforming an arbitral decision following a ruling by the Tribunal Central Administrativo Sul?
The legal basis for reforming an arbitral decision following a Tribunal Central Administrativo Sul ruling is found in Article 28(1)(c) of the RJAT, which provides for nullity of arbitral decisions that fail to rule on matters requiring adjudication. When the administrative court identifies such procedural defects, it declares the decision null and remands the case to the CAAD for issuance of a new decision correcting the identified deficiencies. The reformed decision must address all issues raised by the parties, including constitutional arguments.
Are property owners entitled to compensatory interest (juros indemnizatórios) when an IMI tax assessment is annulled by the CAAD?
Yes, property owners are entitled to compensatory interest (juros indemnizatórios) when an IMI assessment is annulled by CAAD. The arbitral decision specifically ordered the Tax Authority to reimburse the claimant the tax amount paid plus compensatory interest calculated from the payment date until complete reimbursement, in accordance with legal provisions. This interest compensates taxpayers for the financial prejudice of having paid tax amounts later determined to be illegally assessed.