Process: 356/2018-T

Date: January 11, 2019

Tax Type: IMI

Source: Original CAAD Decision

Summary

CAAD arbitration case 356/2018-T addressed whether AIMI (Additional Tax on Municipal Property Tax) unconstitutionally taxes real estate investment companies. The claimant, A... Ltd., challenged the 2017 AIMI assessment of €5,361.60, arguing that properties held as business assets for rental and administration activities don't demonstrate enhanced contributive capacity required under Article 104(3) of the Portuguese Constitution. The company contended AIMI violates constitutional equality principles by penalizing real estate businesses compared to other sectors, since investment properties are production factors rather than wealth manifestations. The claimant drew parallels to the repealed Stamp Duty (Verba 28.1 TGIS), suggesting AIMI inherited similar constitutional defects. The Tax Authority countered that AIMI is a legitimate partial patrimony tax with extrafiscal purposes, structurally different from the prior stamp duty, and that the legislator validly presumed contributive capacity based on property ownership. The Authority emphasized AIMI serves economic functions beyond mere wealth accumulation. The tribunal accepted jurisdiction under RJAT, confirmed procedural regularity, and dispensed with hearings given no factual disputes. Key facts established the claimant as an IRC-subject company whose properties constituted tangible fixed assets and investment properties essential to its core business activity. The decision was scheduled for January 11, 2019, addressing whether AIMI taxation of business-use properties violates constitutional principles of equality and contributive capacity, with potential implications for real estate sector taxation throughout Portugal.

Full Decision

ARBITRAL DECISION

I – REPORT

1 – A... Ltd., with registered office at ... Street, no. ..., ..., ...-... LISBON, with Tax Identification Number (NIPC)..., filed on 27/07/2018 a request for constitution of the arbitral tribunal, pursuant to the provisions of article 2(1)(a), article 3(1), and article 10(1)(a), all of the Legal Framework for Tax Arbitration (RJAT), requesting the Tax and Customs Authority (ATA), with a view to declaring the illegality of the decision dismissing the administrative complaint no. ...2017..., which had as its object the AIMI assessment no. 2017..., relating to the year 2017, in the amount of € 5,361.60.

2 – The request for constitution of the arbitral tribunal was filed without exercising the option to appoint an arbitrator, and was accepted by the Honorable President of the Administrative Arbitration Center (CAAD) and automatically notified to the ATA on 27/07/2018.

3 – Pursuant to the provisions of article 6(2) of the RJAT, by decision of the Honorable President of the Ethics Council, duly communicated to the parties within the legally applicable periods, the sole arbitrator Arlindo José Francisco was appointed, who communicated to the Ethics Council and to the CAAD his acceptance of the assignment within the regularly stipulated period.

4 – The tribunal was constituted on 02/10/2018 in accordance with the provisions contained in article 11(1)(c) of the RJAT, as amended by article 228 of Law no. 66-B/2012 of 31 December.

5 – By filing her request, the claimant seeks, as stated, the declaration of illegality of the decision dismissing the aforementioned administrative complaint, which had as its object the respective AIMI assessment, in the amount of € 5,361.60.

6 – She bases her position, in summary, on the fact that the claimant has as its principal object the administration and exploitation of rural and urban properties, with almost all of them being investment properties, considering that the holding of this patrimony does not allow the essential prerequisite of taxation to be verified, that is, the indication of increased contributory capacity.

7 – Under these circumstances, the application of AIMI to immovable property held by entities of this type is penalizing in an unjustifiably aggravated manner for this sector of activity to the detriment of others, and is therefore contrary to the fundamental principle of equality enshrined in article 13 of the Constitution of the Portuguese Republic (CRP) and to the principle of tax equality and contributory capacity which article 104(3) thereof contemplates, imposing additional burdens on them in relation to enterprises in general solely on the basis of a contributory capacity that does not correspond to reality.

8 – She alleges that AIMI, although structurally distinct from the repealed item 28.1 of the General Stamp Tax (TGIS), nonetheless has similarities, so that the constitutionality issues raised around the aforementioned item will not have been eliminated, having now passed to AIMI, with the legislator maintaining the confusion between manifestations of wealth and factors of production thereof, by promoting the taxation of immovable property held by entities with sufficient economic soundness to bear it, with others that hold them merely as a means for the pursuit and sustenance of their economic activities, as is the case of the claimant.

9 – Lastly, she references arbitral decision 687/2017 which shares her point of view and, additionally, that she is a limited liability company, subject to Corporate Income Tax (IRC) and not exempt, that her taxable profit was not determined by indirect methods, having regularized her tax and contribution situation, reacting against the illegalities mentioned in the manner already known.

10 – In the ATA's response, also in summary, it maintains that AIMI, like Municipal Property Tax (IMI), have the nature of partial or analytical taxes on patrimony and perform in the sphere of their holders, generally, an economic function and not merely an accumulation of wealth.

11 – It considers that the claimant seeks to "attach" the AIMI regime to that provided for in the repealed item 28.1 of the TGIS, and without denying some similarities in the aspect of taxable scope, emphasizes the structural differences, primarily because AIMI was created in differentiated economic-political circumstances, aiming at specific extrafiscal purposes.

12 – Regarding the alleged non-conformities of the ATA's interpretation with legal norms and with the CRP, it considers that such do not occur, insofar as one is dealing with a partial tax on patrimony taxation, with the legislator defining an economically constitutionally valid presumption, such as contributory capacity, according to the criterion it adopted, concluding that the request is unfounded.

II – PROCEDURAL COMPLIANCE

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

The parties have legal personality and capacity, demonstrate themselves to be legitimate, and are regularly represented in accordance with articles 4 and 10(2) of the RJAT and article 1 of Ordinance no. 112-A/2011 of 22 March.

With the ATA's response attached to the case on 06/11/2018, the Tribunal issued the following order: "Considering that there are no exceptions to be heard, no witnesses were listed and there is no controversy regarding the facts, taking into account the principles of the tribunal's autonomy in conducting the proceedings, dispatch, simplification and procedural informality (articles 19 and 29 of the RJAT), the holding of the meeting provided for in article 18 of the RJAT is dispensed with, notifying the parties to, within 10 days, if they wish, make pronouncements on this matter and, within the same period, state whether they intend to produce oral or written arguments or forego them."

After the period granted for the parties to pronounce themselves upon it elapsed, they said nothing, with the following order being issued: "In view of the order of 09/11/2018 and the parties' silence thereon, the Tribunal considers the conditions met to issue a decision, which will occur on 11 January 2019, with the claimant being required to prove to the CAAD by that date the payment of the subsequent court fee, in accordance with article 4(4) of the Regulation of Costs in Tax Arbitration Proceedings."

The proceedings have no nullities. A decision must be rendered.

III – GROUNDS FOR DECISION

1 – The issues to be resolved, with relevance to the case, are the following:

  • Whether to declare or not the illegality of the decision dismissing the aforementioned administrative complaint, which had as its object the AIMI assessment no. 2017..., relating to the year 2017, in the amount of € 5,361.60.

  • Should it be declared illegal with the consequent annulment and restitution of the tax, whether this should be accompanied by the payment of indemnificatory interest, in accordance with article 43 of the General Tax Law (LGT).

2 – Facts of the Case

The relevant and proven facts based on the elements attached to the case are as follows:

  • The claimant is a limited liability company subject to Corporate Income Tax and not exempt, being at the date of the assessment in question, the owner of the immovable properties listed in the respective assessment note, which is hereby given as fully reproduced for all legal purposes.

  • It has as its object, among others, the administration and exploitation of rural and urban properties, with the immovable properties described in the aforementioned note being part of its tangible fixed assets, with the exception of the urban property ...-BP, which correspond to investment properties and which constitute the essential means for the pursuit of its respective activity.

  • It filed on 18 December 2017 an administrative complaint against the aforementioned AIMI assessment, which was dismissed, as notified on 20 April 2018, with the grounds contained in the information supporting the dismissal order, which are contained in the respective complaint proceedings and are hereby given as fully reproduced for all legal purposes.

  • The tax was levied on the sum of the taxable property values (VPT) of the urban properties of which the claimant was the owner and was paid on 24 September 2017.

These are the facts considered proven with relevance to the decision of the case and result from the elements attached to the case by the parties and not contested by either of them.

There are no facts relevant to the decision that have not been given as proven.

3 – Legal Grounds

By Law 42/2016 of 28 December, State Budget Law for 2017, AIMI was created, regulated by articles 135-A to 135-K of the Municipal Property Tax Code (CIMI), Chapter XV of this legal instrument.

The subjective scope of application is contained in article 135-A, with sections 1, 2, and 3 being relevant to the present case, which are transcribed:

1 – The passive subjects of the additional tax to municipal property tax are natural or legal persons who are owners, usufructuaries or surface right holders of urban properties situated in Portuguese territory.

2 – For the purposes of section 1, any structures or centers of collective interests without legal personality that appear in the tax rolls as passive subjects of municipal property tax are equated to legal persons, as well as undivided succession represented by the head of household.

3 – The quality of passive subject is determined in conformity with the criteria established in article 8 of this Code, with the necessary adaptations, having as reference the date of 1 January of the year to which the additional to municipal property tax relates.

Article 135-B addresses the objective scope of application and which we also transcribe, with the wording applicable at that time:

"Article 135-B (*)

Objective scope of application

1 – The additional to municipal property tax is levied on the sum of the taxable property values of urban properties situated in Portuguese territory of which the passive subject is the owner.

2 – The following are excluded from the additional to municipal property tax: urban properties classified as "commercial, industrial or service" and "other" within the meaning of subarticles b) and d) of article 6(1) of this Code."

It should be noted that urban properties referred to in subarticles b) and d) of article 6(1) of the CIMI are excluded, and that article 135-G(1) and article 135-H of the same legal instrument establish the period for assessment and collection of this additional to IMI (June and September of each year, respectively), based on the VPT of the properties registered in the tax rolls as of 1 January of the year to which the tax relates.

The claimant's motivation regarding her understanding of the lack of legal sustainability regarding the dismissal of the administrative complaint by the ATA has been synthetically set forth, which we will group here, for methodological purposes, in three items, namely:

  • The understanding that the legislator intended to create a personal tax on wealth, but of partial scope, given that it only applies to the taxable property value of urban properties, but excluded commercial, industrial, service or other properties therefrom, resulting in an intention not to impose excessive tax burden on passive subjects who, for the exercise of their activity, hold immovable property, as is the case with the claimant;

  • To consider that the grounds for the creation of AIMI, in practice, coincide with those that led to the creation of the repealed item 28 of the TGIS, and that its application to properties held by enterprises such as the claimant is not an indication of increased contributory capacity or wealth, given that those properties are destined for their activity, hence there is no necessary prerequisite for taxation, lacking the indication of increased contributory capacity.

  • The application of AIMI under these circumstances violates the principle of equality enshrined in article 13 of the CRP, as well as the principle of tax equality and contributory capacity enshrined in article 104(3) also of the CRP.

We will analyze each of them:

Item i)

The claimant seeks the exclusion of the subjective scope of AIMI, which directly contradicts the provision in article 135-A(1), transcribed above, which allows us to state that taxation is levied on immovable properties regardless of the nature of the activity conducted. What results from the law is that all urban properties are subject to AIMI, except those referred to in article 135-B(2) of the CIMI, and no others, regardless of the activity exercised by their owners.

Indeed, this has been the jurisprudential rule of the CAAD, which has been sustaining this position in the majority of cases submitted to it.

To say that the legislator intended to create a partial tax on real estate wealth to apply only to the VPT of urban properties and excluding some of them (article 135-B(2)) is also something we do not subscribe to; in fact, what results from the law is that AIMI is precisely that, an additional to IMI and, as such, should be treated in all its aspects, as the jurisprudence of the CAAD has also been deciding, with the legislator excluding from taxation the immovable properties mentioned, regardless of the activity exercised by their owners without, however, ceasing to establish differentiated rates, less burdensome for legal entities, certainly with the idea in mind that the properties held by them would be devoted to economic activities.

As already stated, the characteristic of being an additional to IMI leads us to conclude that the subjection to AIMI and the contributory capacity for both taxes (AIMI and IMI) is the same, regardless of the activities exercised by their owners, making the request unfounded in this aspect.

Item ii)

As already mentioned in the previous item, it results from the law that we are only in the presence of an additional to IMI, with the prerequisites of taxation being the same as those for IMI; therefore, if legal entities holding immovable property, even if devoted to their productive activity, do not cease to have their VPT subject to taxation under IMI, it is evident that the additional to this tax in accordance with the terms established by Law 42/2016 of 28 December has only the same properties as its object, in the precise terms of article 135-B, transcribed, and, in this perspective, subjection to the additional cannot be excluded.

The comparison of the taxation provided for in the repealed item 28 of the TGIS with AIMI is, in the Tribunal's view, unfounded, insofar as the legislator created a designation and a taxation system with express reference to the criteria of the CIMI, and the comparison of decisions taken by the Courts regarding item 28 of the TGIS cannot be transposed to AIMI.

The request is also unfounded in this respect.

Item iii)

Regarding the alleged violation of article 13 and article 103(3) both of the CRP, the claimant cites various Constitutional Court rulings issued in the context of item 28 of the TGIS, and references the decision in case 687/2017 of the CAAD.

The Tribunal, as it has been stating, considers that AIMI is an additional to IMI, hence structurally different from the repealed item 28 of the TGIS, and therefore the concrete situation of the present case is different from those mentioned, even in the aspect of what was decided in case 687/2017 of the CAAD.

Let us then examine whether the taxation of AIMI, provided for in articles 135-A and 135-B of the CIMI, violates the principle of equality which article 13 of the CRP imposes and whether it also violates the principle of contributory capacity provided for in article 104(3) of the CRP, as the claimant understands.

It should be noted that on this matter we subscribe to what is set forth in case 654/2017, part of which we transcribe as we consider relevant to the present case:

"the contributory capacity in question is the same as that of IMI, to which AIMI is added, and the legislator chose to enshrine lighter tax rates for legal entities in relation to natural persons.

As for the tax burden on the real estate sector in relation to other sectors, note that, first and foremost, within the economic sector in question, companies are treated equally, and this is within the scope of the legislator's freedom of action, and is, moreover, common practice and accepted, the interference in economic activities, fiscally incentivizing some and fiscally burdening others. It is further noteworthy that, in this case, contrary to what the Claimant points out, we are not facing a tax burden, but rather a failure to relieve taxation. For, properly viewed, the normative structure created for AIMI consists of a general comprehensiveness thereof, superimposed on properties subject to IMI, followed by the exclusion of applicability with respect to certain types of properties. In this manner, it is not the Claimant or the properties held by her on which tax was assessed that find themselves, in being taxed, facing an exceptional situation of tax burden, but rather the failure to provide the relief sought through subjective or objective exclusion which, if recognized, would be of an exceptional character."

The claimant bases her argument, on constitutionality matters, by resorting to the jurisprudence of the Constitutional Court regarding the repealed item 28 of the TGIS, but, as we have already stated, it cannot be transposed to the norms of AIMI which have express reference to the criteria of the CIMI, quite different from those of the repealed item.

It is thus concluded that the norms of AIMI do not violate the principle of equality enshrined in article 13 of the CRP, nor the principle of tax equality and contributory capacity enshrined in article 104(3) also of the CRP, with the request being unfounded also in this matter.

3.2 – Request for Payment of Indemnificatory Interest

Given what was stated in section 3.1, the examination of the question of indemnificatory interest requested becomes moot.

IV – DECISION

Based on the foregoing, the tribunal decides as follows:

  • To declare the request for arbitral pronouncement unfounded, maintaining in the legal order the decision dismissing the aforementioned administrative complaint, which had as its object the AIMI assessment no. 2017..., relating to the year 2017, in the amount of € 5,361.60, which, as a consequence, remains valid.

  • To set the value of the case at € 5,361.60 in accordance with the provisions contained in article 299(1) of the Code of Civil Procedure (CPC), article 97-A of the Code of Tax Procedure and Process (CPPT), and article 3(2) of the Regulation of Costs in Tax Arbitration Proceedings (RCPAT).

  • Costs to be borne by the claimant, pursuant to article 22(4) of the RJAT, setting the respective amount at € 612.00 in accordance with Table I referred to in article 4 of the RCPAT.

Notify the parties.

Lisbon, 11 January 2019

Text prepared by computer, in accordance with article 131(5) of the CPC, applicable by reference to article 29(1)(e) of the RJAT, with blank lines and revised by the tribunal.

The sole arbitrator,

Arlindo Francisco

Frequently Asked Questions

Automatically Created

What is AIMI (Adicional ao Imposto Municipal sobre Imóveis) and how does it apply to real estate companies in Portugal?
AIMI (Adicional ao Imposto Municipal sobre Imóveis) is an additional tax levied on top of IMI (Municipal Property Tax) in Portugal, targeting higher-value property portfolios. For real estate companies, AIMI applies to the aggregate taxable value of urban properties exceeding €600,000, with rates varying based on ownership structure. Companies subject to IRC (Corporate Income Tax) face AIMI on their property holdings regardless of whether these assets are held for investment purposes or constitute essential business infrastructure. The tax authority considers AIMI a partial patrimony tax with extrafiscal objectives, designed to tax presumed contributive capacity evidenced by substantial real estate ownership. However, real estate companies argue this creates disproportionate burdens when properties are production factors rather than wealth manifestations.
Can Portuguese companies challenge AIMI taxation based on the constitutional principle of equality and contributive capacity?
Portuguese companies can challenge AIMI taxation based on constitutional principles enshrined in Articles 13 and 104 of the Portuguese Constitution. Article 13 establishes the fundamental principle of equality, while Article 104(3) requires taxation to respect equality, contributive capacity, and economic needs. Companies argue AIMI violates these principles when applied to properties held as business assets, claiming it unfairly penalizes real estate sector companies compared to other industries. The constitutional challenge centers on whether AIMI creates unjustified discrimination by taxing production factors (business assets) as if they were manifestations of enhanced wealth. Several CAAD arbitration decisions, including case 687/2017 referenced in this proceeding, have examined these constitutional arguments, though the Tax Authority maintains that the legislator validly presumed contributive capacity based on property ownership, creating an economically and constitutionally sound taxation framework.
How does AIMI differ from the revoked Stamp Duty (Verba 28.1 da Tabela Geral do Imposto do Selo) on high-value properties?
AIMI differs structurally from the revoked Verba 28.1 da Tabela Geral do Imposto do Selo (Stamp Duty on high-value properties) in several key aspects. While both taxes target significant real estate holdings, AIMI was created in distinct economic-political circumstances with specific extrafiscal purposes beyond revenue generation. The stamp duty was a transaction-based tax levied annually on property ownership above certain thresholds, declared unconstitutional due to concerns about double taxation and violation of contributive capacity principles. AIMI, conversely, is structured as an additional levy on IMI, classified as a partial patrimony tax rather than a stamp duty. Despite these structural differences, taxpayers and some arbitrators argue that AIMI inherited similar constitutional defects, particularly the failure to distinguish between wealth manifestations and production factors. The Tax Authority emphasizes that AIMI's different legal framework, objectives, and implementation address the constitutional issues that plagued Verba 28.1, though litigation continues regarding whether these distinctions suffice constitutionally.
What was the outcome of CAAD arbitration process 356/2018-T regarding the legality of AIMI for property investment companies?
The document presents the initial phases of CAAD arbitration process 356/2018-T but does not include the final decision outcome. The case was filed by A... Ltd. on July 27, 2018, challenging AIMI assessment 2017 in the amount of €5,361.60. The arbitral tribunal was constituted on October 2, 2018, with sole arbitrator Arlindo José Francisco. The claimant argued AIMI unconstitutionally taxes investment properties that constitute business assets rather than wealth manifestations, violating equality and contributive capacity principles under Articles 13 and 104(3) of the Portuguese Constitution. The Tax Authority defended AIMI as a legitimate partial patrimony tax with valid presumptions of contributive capacity. The tribunal dispensed with hearings given no factual disputes and scheduled the decision for January 11, 2019. To determine the actual outcome, one would need to access the complete decision issued on that date, which would address whether AIMI taxation of property investment companies violates constitutional principles and whether the assessment should be annulled with restitution and indemnificatory interest.
Does holding investment properties as business assets constitute enhanced contributive capacity for AIMI purposes under Article 104 of the Portuguese Constitution?
Whether holding investment properties as business assets constitutes enhanced contributive capacity for AIMI purposes under Article 104 of the Portuguese Constitution remains contentious. The Tax Authority argues that substantial property ownership inherently demonstrates contributive capacity, regardless of whether properties serve as business assets or personal wealth. This position treats real estate holdings as valid indicators of economic capacity to contribute to public expenses, with AIMI functioning as a partial patrimony tax that presumes wealth based on asset ownership. However, taxpayers challenge this presumption when properties constitute production factors essential to business operations rather than discretionary wealth accumulation. Real estate companies argue that investment properties generating rental income are working capital comparable to machinery in manufacturing—necessary business infrastructure rather than manifestations of surplus wealth. This distinction matters constitutionally because Article 104(3) requires taxation to respect actual contributive capacity, not merely formal asset ownership. The debate centers on whether the legislator's presumption that property ownership equals enhanced capacity remains constitutionally valid when applied to businesses whose core activity requires substantial real estate holdings, potentially creating sectoral discrimination prohibited under constitutional equality principles.