Process: 379/2016-T

Date: December 7, 2016

Tax Type: IMI

Source: Original CAAD Decision

Summary

CAAD arbitration case 379/2016-T examines whether properties located within a UNESCO World Heritage Historic Center or designated heritage streets qualify for IMI exemption under Article 44(1)(n) of the Portuguese Tax Benefits Statute (EBF). The claimant company challenged a 2015 IMI assessment of €3,200.45 for ten urban properties, arguing that: (1) nine properties within the Historic Center, classified as National Monuments under UNESCO World Heritage status, should be automatically exempt; and (2) one property on a street classified as 'property of public interest' should also qualify for exemption. The core legal dispute centers on interpreting Article 44(1)(n) EBF, which provides IMI exemption first for National Monuments, and secondly for properties individually classified as public or municipal interest. The claimant relied on Article 15(7) of the Cultural Heritage Law, which states that immovable assets on the UNESCO World Heritage list integrate as 'national interest' assets in their respective category, arguing this confers National Monument status on all properties within the designated ensemble. The Tax Authority raised procedural objections regarding judicial representation and requested suspension pending parallel administrative proceedings in the Tax and Administrative Court of Braga. The AT also contested the claimant's interpretation of heritage classification evolution, distinguishing between classification graduations (National Monument, Public Interest, Municipal Value) and legal-patrimonial concepts in the Cultural Heritage Law. This case highlights critical issues regarding automatic vs. individual classification requirements, the interaction between cultural heritage law and tax benefits legislation, and whether ensemble/site designations extend tax exemptions to constituent properties without individual classification acts.

Full Decision

ARBITRAL DECISION

1. REPORT

1.1. A…, Lda., taxpayer no.…, with registered address at Rua …, no.…, …, in ... (hereinafter referred to as "Claimant"), submitted on 08/07/2016 a request for arbitral pronouncement with a view to the assessment and declaration of illegality of the assessment of Municipal Property Tax (IMI), relating to the year 2015, in the total amount of € 3,200.45 (three thousand two hundred euros and forty-five cents).

1.2. His Excellency the President of the Deontological Council of the Administrative Arbitration Center (CAAD) appointed, on 18/07/2016, the undersigned as sole arbitrator of this decision.

1.3. On 30/09/2016 the arbitral tribunal was constituted.

1.4. In compliance with the provisions of article 17, no. 1 of the Legal Regime of Tax Arbitration (RJAT), the Tax and Customs Authority (AT) was notified on 04/10/2016 to, if it so wished, submit a response and request the production of additional evidence.

1.5. On 07/11/2016 the AT submitted its response, defending itself by exception and by objection, and also raising a preliminary question.

1.6. The arbitral tribunal on 08/11/2016 decided to dispense with the holding of the meeting referred to in no. 1 of article 18 of the RJAT, on the grounds of the principle of autonomy of the arbitral tribunal in the conduct of proceedings, inviting both parties to, if they so wished, submit optional written submissions and scheduled the date for issuing the final decision.

1.7. On 21/11/2016 the Claimant submitted written submissions.

1.8. On 02/12/2016 the AT submitted written submissions.

2. PLEADING AND OBJECTIONS

The arbitral tribunal was regularly constituted and is substantively competent.

The parties have legal personality and capacity and are legitimate, with no defects in representation.

The proceedings do not suffer from defects that would invalidate them.

Consequently, all conditions are met for the final decision to be issued.

3. POSITIONS OF THE PARTIES

As the basis for its claim, the Claimant alleges in summary that:

a) As regards the urban properties registered in the property roll under articles no.…, no.…, no.…, no.…, no.…, no.…, no.…, no.… and no.…, all of the Union of Freguesias of …, … and … (municipality of ...), classified as National Monuments, as they are located within the Historic Center of ..., the assessment in question is based on an error regarding the assumptions concerning the application of article 44, no. 1, paragraph n), 1st part, of the Tax Benefits Statute (EBF);

b) As regards the urban property registered in the property roll under article no.… of the Union of Freguesias of …, … and … (municipality of ...), individually classified as "property of public interest", as it is located within the group designated Rua …, the assessment in question is based on an error regarding the assumptions concerning the application of article 44, no. 1, paragraph n), 2nd part, of the EBF;

c) Article 44, no. 1, paragraph n) of the EBF is clear in stipulating, in the first place, that properties classified as "national monuments" are exempt from IMI and only in the second place, that properties individually classified as "public interest" or "municipal interest" are exempt;

d) Furthermore, in referring to the classification as being made "in accordance with applicable legislation", the legislator is referring to the Cultural Heritage Law [1], whose article 15 establishes that immovable cultural assets may belong to the categories of monument, ensemble or site, in accordance with the terms in which they are defined in international law;

e) Article 15, no. 7, of the Cultural Heritage Law expressly and unequivocally states that "immovable cultural assets included in the list of world heritage integrate, for all purposes and in their respective category, the assets qualified as of national interest";

f) An asset classified as of national interest is designated as a "national monument", regardless of whether it is a single building, ensemble or site, and it is clear that the immovable properties that make up the ensemble are covered by this classification;

g) In this measure, both by the letter of the law and by its spirit, the Claimant's immovable properties identified in paragraph a) above, as they form part of the Historic Center of ..., are immovable properties of "national interest" and, therefore, legally qualified as "national monument", whereby, in accordance with the provisions of article 44, no. 1, paragraph n), of the EBF, they benefit from IMI exemption, which is of an automatic character, operating through communication of the classification as "national monument" [2];

h) As the Rua …, was classified as a "property of public interest" [3], whereby the legislator, by specifying this street as a whole, leaves no room for doubt that he intended to include all properties that compose it, without the need for individual classification;

i) However, the legislator, when seeking to alter the classification of cultural assets in 2006 [4], by introducing the adverb "individually", violated not only the Cultural Heritage Law as a law of enhanced value, but also the conventions to which Portugal has acceded, such as in particular the Convention for the Protection of the Architectural Heritage of Europe, signed in Granada, on 3 October 1985 [5], which are in force in the domestic legal order and bind the Portuguese State internationally;

j) Thus, the intended introduction of the amendment to the classification of immovable cultural assets as regards "properties of public interest" should be interpreted in light of the Constitution or a law of enhanced value, in the sense that it cannot, on pain of nullity, alter the terms of the classification made;

k) In conclusion, the IMI assessments in question are illegal because they violate the provisions of article 44, no. 1, paragraph n), and no. 5 of the EBF, and should therefore be annulled;

The AT objected in summary, by exception, on the grounds of irregularity of judicial representation, since the judicial power of attorney attached to the request for arbitral pronouncement was not granted in favor of the judicial representative identified therein.

Alternatively, the AT argued that the discussion of the legality of the IMI assessment in question constitutes a preliminary question that depends on the understanding that, at an upstream stage, may be established regarding the decisions terminating the IMI exemption for the immovable properties identified in paragraphs a) and b) above and which are being assessed in special administrative proceedings in the Tax and Administrative Court (TAF) of Braga, whereby the arbitral instance should be suspended.

Without admitting liability, the AT further alleged, by objection, in summary that:

a) With regard to the evolution of the concept of "classification", the AT notes that:

  • In the Constitutional Monarchy there was provided a single graduation of "Classification": "National Monument";
  • Already in the 1st Republic there were provided two graduations of "Classification": "National Monument" and "Property of Public Interest";
  • In the Estado Novo there were provided three graduations of "Classification": "National Monument", "Property of Public Interest" and "Municipal Value";
  • At the beginning of the 3rd Republic the concept of "category" was introduced and the graduations of "classification" were expanded, although neither of these were ever applied because the then Cultural Heritage Law [6] was not subject to the necessary regulation;
  • During the 3rd Republic and until the emergence of the current Cultural Heritage Law, the graduations of "Classification" created by the Estado Novo continued to be applied;

b) Furthermore, with regard to the distinction of the various concepts contained in article 15 of the Cultural Heritage Law, the AT argues that:

  • The Cultural Heritage Law enshrines in article 15 three distinct legal-patrimonial concepts regarding immovable cultural assets, namely: the "Category", the "Classification" and the "Designation" [7];
  • There are three "Categories" provided for in the Cultural Heritage Law: "Monument", "Ensemble" and "Site" [8], with their respective definitions, for what is relevant in the case in question, contained in the Convention for the Protection of the World Cultural and Natural Heritage, signed in Paris on 16 November 1972 [9];
  • Thus, there are three "classifications" provided for in the Cultural Heritage Law: "National Interest", "Public Interest" and "Municipal Interest" [10], organized on a scale of decreasing graduation; and
  • The designation of "National Monument" is reserved exclusively for monuments, ensembles or sites that are classified as being of National Interest [11].

c) The AT concludes that the skewed reasoning in which the Claimant fell results, in concrete terms, from the fact that the Claimant confuses the current concepts of "Classification" and "Designation" and, likewise, the fact of confusing the concept of "Designation" introduced by the Cultural Heritage Law with the concept of graduation of "Classification" as "National Monument" that prevailed until the entry into force of the Cultural Heritage Law in 2001;

d) Indeed, the AT argues that since 2001 there is no classification called "National Monument", but only classifications called "National Interest", "Public Interest" or "Municipal Interest", whereby it is manifestly impossible to state that the Historic Center of ... is classified as "National Monument";

e) On the other hand, when inscribing a cultural asset in the "List of World Heritage", the UNESCO Cultural Heritage Committee is not properly classifying an asset, but rather recognizing that such cultural asset also "(…) constitutes a universal heritage for the protection of which the international community as a whole has a duty to cooperate" [12];

f) It follows thus that the classification of a cultural asset necessarily depends on a prior administrative procedure of "Classification";

g) The AT concludes, therefore, that the so-called Historic Center of ...:

  • Belongs to the category of "Ensemble" [13];
  • Is included in the list of assets classified as of "National Interest" [14]; and
  • Is designated by "National Monument" [15], it being certain that the designation of "National Monument" does not confuse with nor is equivalent to the concept of classification called "National Monument" that prevailed until the entry into force of the Cultural Heritage Law in 2001;

h) As regards the error in the assumptions regarding the property classified as "Property of Public Interest", the AT argues that it is an abusive interpretation the conclusion according to which the urban property here in question, merely by being located in the "Category" of the "Ensemble" designated "Rua …, in ...", is individually classified as "Property of Public Interest";

i) On the other hand, regarding the alleged violation of the Cultural Heritage Law, the Convention for the Protection of the Architectural Heritage of Europe, signed in Granada, on 3 October 1985 and the Constitution by Law no. 53-A/2006, of 29 December, the AT argues that the Claimant confuses the legislation regarding the administrative procedure for classifying cultural assets with legislation regarding tax benefits directed to cultural heritage:

  • Law no. 53-A/2006, of 29 December did not make any amendment to the Cultural Heritage Law;
  • In amending the wording of article 44, no. 1, paragraph n), of the EBF, Law no. 53-A/2006, of 29 December did not carry out any phenomenon of declassification of cultural assets;
  • Law no. 53-A/2006, of 29 December did not violate the Convention for the Protection of the Architectural Heritage of Europe, signed in Granada, on 3 October 1985, since this international treaty in no way contends with the concept of "Classification", but rather with the concept of "Category";
  • The amendment introduced by Law no. 53-A/2006, of 29 December is entirely within the freedom of legislative shaping of the Portuguese parliamentary legislator, which understood that the best way to prevent opportunistic enjoyment of the tax benefit in question would be through the requirement of individual classification of the property;

j) By the foregoing, the AT concludes that the so-called Historic Center of ...:

  • Belongs to the category of "Ensemble";
  • Is included in the list of assets classified as of "National Interest"; and
  • Is designated by "National Monument", it being certain that the designation of "National Monument" does not confuse with nor is equivalent to the concept of classification called "National Monument" prevailing until the entry into force of the Cultural Heritage Law in 2001;

k) Article 44, no. 1, paragraph n), 1st part, of the EBF relates to the classification of "National Monument" that prevailed in our legal system until the entry into force of the Cultural Heritage Law in 2001, a classification that cannot be confused with the concept of "Designation" of "National Monument" contained, for what is relevant therein, in articles 15, no. 3 and no. 7 of the Cultural Heritage Law.

4. FACTUAL MATTERS

4.1. FACTS FOUND TO BE PROVEN

In light of the documents submitted to the proceedings, the following are found to be proven:

4.1.1. The Claimant is the owner of the urban properties located in … and its surroundings, registered in the respective property roll of the Union of Freguesias of …, … and …, in the city of ..., under articles no.…, no.…, no.…, no.…, no.…, no.…, no.…, no.… and no.…;

4.1.2. And is also the owner of the urban property located at Rua …, no.…, of the same Union of Freguesias of …, … and …, in the city of ..., registered in the urban property roll under no.…;

4.1.3. The aforesaid immovable properties, of the Historic Center of ..., are part of the UNESCO World Heritage List – see Notice no. 15171/2010, published in the Official Gazette no. 147, of 30 July 2010;

4.1.4. The urban property that is part of the ensemble of Rua … was classified as a "property of public interest" by Decree no. …/…, published in the Official Government Gazette no.…, of 21 December 1974;

4.1.5. As results from the certificates issued by the Regional Directorate of Culture North, the properties of the Historic Center of ... are classified as "national monument", in accordance with the provisions of no. 3 and no. 7 of article 15 of the Cultural Heritage Law, as they form an integral part of the UNESCO World Heritage List, in 2001, as the "Historic Center of ...";

4.1.6. As results from the certificate issued by the Regional Directorate of Culture North, the urban property that is part of the ensemble of Rua … is classified as a "property of public interest";

4.1.7. These properties have benefited, since 2008, from IMI exemption, as confirmed by the property records attached to the proceedings;

4.1.8. The Claimant was notified of the draft decision to terminate the IMI exemption of the properties described above and exercised its right to be heard;

4.1.9. Subsequently, it was notified of the rulings rejecting the Claimant's claim, thus terminating the IMI exemption that such properties enjoyed;

4.1.10. On 19/02/2016, the Claimant filed in the TAF of Braga a special administrative action, requesting the annulment of the rulings that decreed the termination of IMI exemption regarding the urban properties registered in the property roll under articles no.…, no.…, no.…, no.…, no.…, no.…, no.…, no.… and no.…, (Case no. 361/16.0BEBRG of the 3rd Organizational Unit);

4.1.11. On 02/03/2016, the Claimant filed in the same Court a special administrative action, requesting the annulment of the ruling that decreed the termination of IMI exemption regarding the urban property registered in the property roll under article no.… (Case no. 443/16.8BEBRG of the 2nd Organizational Unit);

4.1.12. The Claimant was notified to proceed, during the month of April 2016, with the payment of assessment no. 2015…, of 26/02/2016, corresponding to the 1st installment of IMI for 2015, in the amount of € 1,066.83;

4.1.13. On 08/04/2016, the Claimant proceeded with the payment of the 1st installment of IMI for 2015, in the amount of € 1,066.83;

4.1.14. The Claimant was notified to proceed, during the month of July 2016, with the payment of assessment no. 2015…, of 26/02/2016, corresponding to the 2nd installment of IMI for 2015, in the amount of € 1,066.81;

4.1.15. On 07/06/2016, the Claimant proceeded with the payment of the 2nd installment of IMI for 2015, in the amount of € 1,066.81;

4.1.16. On 08/07/2016, the Claimant submitted the request for arbitral pronouncement that gave rise to the present proceedings;

4.1.17. Already after submission of the request for arbitral pronouncement that gave rise to the present proceedings, in November 2016, the Claimant proceeded with the payment of the 3rd installment of IMI for 2015, in the amount of € 1,066.81.

4.2. FACTS NOT FOUND TO BE PROVEN

There are no facts with relevance to the decision that have not been found to be proven.

5. THE LAW

5.1. ON THE EXCEPTION OF IRREGULARITY OF JUDICIAL REPRESENTATION

The irregularity of judicial representation raised by the AT was remedied by the Claimant with the submission of a new power of attorney that ratified all proceedings, whereby the exception raised is not upheld.

5.2. ON THE PRELIMINARY QUESTION TENDING TO SUSPENSION OF THE ARBITRAL INSTANCE

As results from what was set out above, in its respective submissions, the AT formulates a request, which it classifies as subsidiary, tending to suspend the present arbitral instance.

Before proceeding with the assessment of the merits of the question that now concerns us, it is important to clarify the framework in which it is concretely placed.

Indeed, it cannot be overlooked that we are within the scope of arbitral jurisdiction. A specific arbitral jurisdiction, certainly, but indisputably arbitral.

Within this scope, the principle of free conduct of proceedings by the arbitrators [16] applies fully, and therefore, any norm of a procedural nature is not automatically applicable except for those that expressly result from the RJAT.

This does not mean that ordinary procedural norms do not contain normative content directly transposable to the arbitral proceedings, but this transposition is always, in any case, mediated by the prudent discretion of the arbitrators, always "(…) with a view to obtaining, within a reasonable timeframe, a substantive pronouncement on the claims formulated.".

Furthermore, in addition to being within the scope of arbitral jurisdiction, we are, naturally, within the scope of tax jurisdiction. From this it follows that the procedural norms that are primarily transposable to the regulation of procedural matters will obviously be those of tax proceedings, the majority of which are condensed in the Code of Tax Procedure and Process (CPPT), which in its article 2 establishes that:

"The following are applicable in a supplementary manner to tax judicial procedure and proceedings, in accordance with the nature of omissions:

a) The norms of a procedural or procedural nature of the tax codes and other laws;

b) The norms on the organization and functioning of the tax administration;

c) The norms on organization and proceedings in administrative and tax courts;

d) The Code of Administrative Procedure;

e) The Code of Civil Procedure.".

In practice, it follows from the foregoing that the Code of Civil Procedure (CPC) is last on the list of legislation applicable to omitted procedural and tax process matters.

It thus results, in summary, that the tax arbitral procedural relationship is regulated in accordance with the prudent discretion of the arbitrators "(…) with a view to obtaining, within a reasonable timeframe, a substantive pronouncement on the claims formulated.", based on the general tax procedural norms, against which the CPC comes last as regards the filling of omissions.

It is, therefore, in light of the criterion thus formulated that the request for suspension of the instance formulated by the AT should be assessed.

In civil proceedings, this matter is regulated in article 279, which in its no. 1 establishes that "The court may order suspension when the decision of the case is dependent on the judgment of another already filed or when another justified reason occurs.".

In the case in question, it appears that in Cases no. 361/16.0BEBRG and no. 443/16.8BEBRG the discussion concerns the annulment of the rulings that decreed the termination of IMI exemption regarding the immovable properties that make up the Historic Center of ... and, likewise, the property located at Rua….

The request for arbitral pronouncement that gave rise to the present proceedings, on the other hand, aims at the assessment and declaration of illegality of the IMI assessment, relating to the year 2015, in the total amount of € 3,200.45.

Although it may be understood that the IMI assessment in question is the result of 10 decisions issued by the AT by means of which it terminated the IMI exemption regarding the immovable properties identified above, it would be necessary to determine whether or not the requested suspension of the instance would be justified, in light of the interests concretely at stake.

Indeed, it is understood that the norm of article 279, no. 1 of the CPC does not impose a necessary suspension, once a prejudicial relationship is verified, or another justified reason, which follows, among other things, from the use of the expression "may" in the normative text in question.

Now, having analyzed the situation in question, one should always conclude that there is no necessity for the instance to be suspended.

Nevertheless, even if it were understood that the application of the norms regulating civil proceedings would result in the consequence requested by the AT, the fact is that civil procedural norms are not automatically applicable to tax arbitral proceedings, but rather their application is merely supplementary to other norms and conditioned by the principle of free conduct of proceedings by the arbitrators, "(…) with a view to obtaining, within a reasonable timeframe, a substantive pronouncement on the claims formulated.".

In this framework, the requested suspension of the instance would also have to be considered undesirable.

Indeed, tax arbitral proceedings are manifestly informed by a marked principle of expedition, which is demonstrated, among other things, in an intended procedural simplification and in the establishment of strict deadlines for the issuance of a final decision [17].

The suspension of the instance requested by the AT, without a fixed deadline and conditioned on the final judicial determination of two special administrative actions, would be notoriously incompatible with the expedition generally sought for arbitral proceedings and with the deadlines provided in article 21 of the RJAT in particular, all the more so that after the final judicial determination of the decisions in question, the arbitral proceedings would still have to be resumed with a view to issuing its final decision, with the consequent addition of time.

In this measure, with a view to the "obtaining, within a reasonable timeframe, a substantive pronouncement on the claims formulated", the requested suspension of the present arbitral instance would always have to be rejected, which is hereby determined.

5.3. ON THE ILLEGALITY OF THE IMI ASSESSMENT

In the case in question, article 44, no. 1, paragraph n), of the EBF is involved, which provides that the following are exempt from IMI, in accordance with applicable legislation:

  • Properties classified as national monuments; and
  • Properties individually classified as of public interest or of municipal interest.

It results from the facts ascertained in these proceedings that the immovable properties of the Historic Center of ..., whose acts of IMI assessment are contested, are classified as national monuments.

In this way, taking into account the provision of the norm under analysis, the properties in question are exempt from IMI as long as they are classified as national monuments in accordance with applicable legislation.

Indeed, in accordance with article 44, no. 1, paragraph n), of the EBF it is not required that the properties classified as national monuments be individually classified. This requirement only applies to properties classified as of public interest or of municipal interest.

Now, taking into account that the classification of properties as national monuments must be in accordance with applicable legislation, it is important to note the provisions of article 15 of the Cultural Heritage Law, in accordance with which:

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

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

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

4 - An asset is considered to be of national interest when its protection and enhancement, in whole or in part, represents a cultural value of significance for the Nation(...)."

This formulation is, moreover, reiterated in article 2 of Decree-Law no. 309/2009, of 23 October [18], with its article 3, no. 1 stating that "an immovable asset may be qualified as of national interest, of public interest or of municipal interest", and adding in no. 3 that "the designation "national monument" is attributed to immovable assets classified as of national interest, whether they are ensembles or sites".

The properties in question are part of the Historic Center of ..., which was inscribed in the UNESCO World Heritage List, as declared by Notice no. 15171/2010, published in the Official Gazette no. 147, of 30 July 2010, issued pursuant to no. 3 of article 72 of Decree-Law 309/2009, of 23 October.

Article 15, no. 7, of the Cultural Heritage Law expressly states that "immovable cultural assets included in the list of world heritage integrate, for all purposes and in their respective category, the assets qualified as of national interest".

That is naturally the case of the Historic Center of ..., and consequently the properties located there are classified as national monuments.

Indeed, and as provided for in article 15 of the Cultural Heritage Law and article 3 of Decree-Law no. 309/2009, of 23 October, an asset classified as of national interest is designated as a "national monument", regardless of whether it is a single building, ensemble or site, and it is clear that the immovable properties that make up the ensemble or site are covered by this classification.

The fact that individually classified properties may coexist, in case of delimitation of an ensemble or site, in accordance with article 56 of Decree-Law no. 309/2009, of 23 October, has only provisional relevance for delimiting the protection zone of such property until publication of the classification of the ensemble or site [19].

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

Differently, article 6, paragraph g) of the Code of Municipal Tax on Onerous Transfers of Immovable Property (IMT) provides, in accordance with which the following are exempt from IMT "acquisitions of properties individually classified as of national interest, of public or municipal interest, in accordance with applicable legislation".

However, the Claimant seeks the annulment of the acts of IMI assessment and not of IMT assessment, in reliance on article 44, no. 1, paragraph n), of the EBF, which does not require any individualized classification for the granting of exemption to properties classified as national monuments.

Furthermore, the norm of article 44, no. 4, of the EBF, as amended by Law 3-B/2010, of 28 April, expressly provides that "the exemption referred to in paragraph n) of no. 1 is of an automatic character, operating through communication of the classification as national monuments or of individualized classification as properties of public or municipal interest (…)".

It thus results, in very clear terms, that the legislator's intention was to waive the requirement for individualized classification for purposes of IMI exemption for national monuments, only requiring it in relation to properties of public or municipal interest.

Consequently, since the properties under analysis are integrated in the Historic Center of ..., legally qualified as a national monument, the acts of IMI assessment in question are illegal.

Furthermore, with regard, specifically, to the urban property registered in the property roll under article no.… of the Union of Freguesias of …, … and … (municipality of ...), this is located at Rua …, no.….

The Rua …, was classified as a "property of public interest" as a whole by Decree no. …/…, published in the Official Government Gazette no.…, of 21 December 1974.

In this measure, in specifying the Rua …, as a whole, the legislator expressed his thought in terms that raise no doubt, as to the text of the law (grammatical element) and as to its respective "ratio legis", since if it were understood that the properties that make up that Rua would need individual classification, it would not have had the need to invoke the whole of that Rua.

Moreover, immovable assets individually classified in the area covered by the delimitation of an ensemble only maintain their effects until publication of the ensemble.

That is precisely what article 56, no. 2, of Decree-Law no. 309/2009, of 23 October provides, in accordance with which "The effects of the protection zone of an individually classified immovable asset are maintained until publication of the ensemble or site as provided for in no. 1 of art. 32".

In light of the foregoing, both by the letter of the law and by its spirit, the urban property registered in the property roll under article no.… of the Union of Freguesias of …, … and …(municipality of ...) by being part of the ensemble of Rua …, is a "property of public interest" and, as such, is exempt from IMI under article 44, no. 1, paragraph n), of the EBF, whereby the acts of IMI assessment in question are also illegal in this regard.

The assessment of the other questions raised by the Claimant is thus prejudiced, as the illegality of the assessments above identified has been declared, due to a substantive defect that prevents their renewal, ensuring effective protection of the Claimant's rights, in accordance with the provision of article 124 of the CPPT [20].

6. DECISION

With the grounds set out above, the arbitral tribunal decides:

a) To judge the request for declaration of illegality of the IMI assessment relating to the year 2015, in the total amount of € 3,200.45, wholly well-founded;

b) To condemn the AT to refund to the Claimant the amount of tax paid, plus compensatory interest, from the date of payment until full refund;

c) To condemn the AT in the costs of the present proceedings, as the defeated party.

7. CASE VALUE

The case value is fixed at € 3,200.45 (three thousand two hundred euros and forty-five cents), in accordance with article 97-A of the Code of Tax Procedure and Process (CPPT), applicable by virtue of paragraphs a) and b) of no. 1 of article 29 of the RJAT and no. 2 of article 3 of the Regulation of Costs in Tax Arbitration Proceedings (RCPAT).

8. COSTS

Costs to be borne by the AT, in the amount of € 612.00 (six hundred and twelve euros), in accordance with Table I of the Regulation of Costs of Tax Arbitration Proceedings, in accordance with no. 2 of article 22 of the RJAT.

Notify.

Lisbon, 7 December 2016

The arbitrator,

Hélder Filipe Faustino

Text prepared by computer, in accordance with the provisions of no. 5 of article 131 of the CPC, applicable by reference of paragraph e) of no. 1 of article 29 of the RJAT. The editing of this decision is governed by the spelling prior to the Orthographic Agreement of 1990.

[1] Approved by Law no. 107/2001, of 8 September, establishes the basis of the policy and regime for protection and enhancement of cultural heritage.

[2] See article 44, no. 5, of the EBF.

[3] See Decree no. 735/74, of 21 December.

[4] See Law no. 53-A/2006, of 29 December, in accordance with which, "Properties classified as national monuments and properties individually classified as of public interest, of municipal value or cultural heritage, in accordance with applicable legislation." [underlined by us].

[5] Whose text was approved for ratification by Resolution of the Assembly of the Republic no. 5/91, of 23 January.

[6] See Law no. 13/85, of 6 July, which approved the law of Portuguese cultural heritage, which was repealed by Law no. 107/2001, of 8 September.

[7] See, respectively, no. 1, no. 2 and no. 3.

[8] See article 15, no. 1 of the Cultural Heritage Law.

[9] Whose text was approved for accession by Decree of the Ministry of Foreign Affairs no. 49/79, of 6 June.

[10] See article 15, no. 2 of the Cultural Heritage Law.

[11] See article 15, no. 3 of the Cultural Heritage Law.

[12] See article 6, no. 1 of the Convention.

[13] See no. 1 of Notice no. 15171/2010, of 30 July.

[14] See article 15, no. 7 of the Cultural Heritage Law.

[15] See article 15, no. 3 and no. 7 of the Cultural Heritage Law.

[16] As results from article 16, no. 1, paragraph c) of the RJAT.

[17] See article 21 of the RJAT.

[18] Diploma that establishes the procedure for classifying immovable cultural assets of cultural interest, as well as the regime of protection zones and the detailed safeguarding plan.

[19] See article 56, no. 2 of Decree-Law no. 309/2009, of 23 October.

[20] Subsidiarily applicable by virtue of the provision of paragraph a) of no. 1 of article 29 of the RJAT.

Frequently Asked Questions

Automatically Created

Are properties classified as National Monuments within a UNESCO World Heritage site exempt from IMI under Article 44(1)(n) of the EBF?
Properties within a UNESCO World Heritage site are not automatically exempt from IMI solely by location. Article 44(1)(n) of the EBF requires classification as a 'National Monument' for exemption. While Article 15(7) of the Cultural Heritage Law states that World Heritage assets integrate as 'national interest' assets, the tax exemption depends on whether the individual property holds formal National Monument classification or whether ensemble designation extends to constituent properties. The central legal debate is whether UNESCO World Heritage ensemble status confers National Monument classification to all properties within the designated area automatically, or if individual classification acts are required for each property to benefit from the IMI exemption.
What is the difference between the IMI exemption for National Monuments and properties of public interest under the Portuguese Tax Benefits Statute?
Article 44(1)(n) of the EBF establishes a hierarchical distinction: first, properties classified as 'National Monuments' receive automatic IMI exemption; second, properties 'individually' classified as 'public interest' or 'municipal interest' are exempt. The key difference lies in the classification level and the requirement for individual designation. National Monument classification represents the highest heritage protection level, while public interest is a lower tier. The 2006 legislative amendment introduced the term 'individually' for public/municipal interest properties, creating interpretative disputes about whether ensemble or collective street designations suffice or if each property requires separate classification. National Monuments benefit from broader exemption criteria without the 'individually' qualifier that applies to lower-tier classifications.
How does CAAD arbitration work for challenging IMI property tax assessments in Portugal?
CAAD (Centro de Arbitragem Administrativa) arbitration for IMI challenges follows the RJAT (Legal Regime of Tax Arbitration) procedural framework. The taxpayer submits an arbitration request specifying the contested IMI assessment. The CAAD President appoints a sole arbitrator who constitutes the arbitral tribunal. The Tax Authority is notified under Article 17(1) RJAT to submit a response and request additional evidence. The tribunal may dispense with hearings under the principle of procedural autonomy, allowing parties to submit written pleadings. The process includes preliminary questions, exceptions, and substantive merit arguments. Decisions address jurisdictional competence, party legitimacy, procedural validity before ruling on the merits. This alternative dispute resolution mechanism provides specialized tax adjudication outside traditional court systems, with faster resolution timelines than administrative litigation.
Does location within a designated Historic Zone automatically qualify a property for IMI tax benefits in Portugal?
Location within a designated Historic Zone does not automatically qualify properties for IMI tax benefits. Article 44(1)(n) of the EBF requires formal heritage classification, not merely geographic location. The critical issue is whether collective designation of an area (Historic Center, UNESCO site, heritage street) extends classification to all constituent properties or if individual classification acts are necessary. The claimant argued that ensemble designation under Cultural Heritage Law Article 15 should confer National Monument status to all properties within the designated area. However, the 2006 legislative amendment requiring 'individual' classification for public interest properties suggests geographic location alone is insufficient. The legal framework distinguishes between site/ensemble recognition and property-specific classification, with tax benefits tied to formal classification status rather than mere location within protected zones.
What legal requirements must be met to claim an IMI exemption for heritage-classified properties under Article 44 of the EBF?
To claim IMI exemption under Article 44 EBF for heritage-classified properties, the following legal requirements must be satisfied: (1) Formal classification as National Monument, or individual classification as property of public or municipal interest under applicable cultural heritage legislation; (2) Classification must comply with the Cultural Heritage Law definitions of monument, ensemble, or site categories; (3) For properties claiming National Monument status via UNESCO World Heritage inclusion, evidence that Article 15(7) Cultural Heritage Law integration as 'national interest' assets confers the necessary classification; (4) For public interest properties, demonstration of 'individual' classification post-2006 legislative amendments; (5) Communication of classification to tax authorities, as exemption operates automatically upon classification notification; (6) Compliance with Article 44(5) EBF procedural requirements. Properties must prove not just location within designated areas but actual classification status meeting statutory exemption criteria.