Process: 382/2015-T

Date: February 26, 2016

Tax Type: IMT Selo

Source: Original CAAD Decision

Summary

This arbitration case (Process 382/2015-T) before the Administrative Arbitration Center (CAAD) concerns the legality of additional IMT (Municipal Tax on Onerous Real Property Transfer) and Stamp Duty assessments totaling €8,944.99 issued after revocation of tourist utility tax benefits. The Claimant acquired a property with tourist utility status in 2009, initially receiving favorable tax treatment: IMT was not due and Stamp Duty was reduced to one-fifth of the standard amount. In 2015, following revocation of the tourist utility exemption, the Tax Authority issued new assessments for both taxes. The central legal dispute focuses on characterizing these 2015 assessments: the Claimant argues they constitute 'additional assessments' intended to correct the original 2009 assessments, thus subject to a four-year limitation period under Article 31(3) of the IMT Code. Conversely, the Tax Authority contends these are 'original assessments' subject to an eight-year limitation period under Article 35(1) of the IMT Code, calculated from the tax-triggering event or cessation of the exemption. The Tax Authority raised two preliminary objections: (i) impropriety of the procedural remedy employed by the Claimant, and (ii) lack of jurisdiction ratione materiae of the arbitral tribunal. During proceedings, the Tax Authority annulled the Stamp Duty assessment, acknowledging it violated the applicable limitation period, leaving only the IMT assessment of €8,143.20 under review. The arbitral tribunal, constituted as a sole arbitrator under the Legal Framework for Tax Arbitration (Decree-Law 10/2011), determined that no hearing was necessary given the simplicity of issues and clarity of party positions. The tribunal confirmed its jurisdiction and the parties' legal capacity to proceed. The case illustrates critical issues regarding temporal limitations on tax assessments when exemptions are retroactively revoked, the proper classification of subsequent assessments, and available procedural remedies for taxpayers challenging IMT assessments related to tourist utility properties through tax arbitration.

Full Decision

ARBITRAL DECISION

I. Report

  1. A... (hereinafter "Claimant"), with tax identification number ("TIN")..., resident at..., apartment..., Block..., ..., ...-..., filed, on June 12, 2015, pursuant to the combined provisions of Articles 2 and 10 of Decree-Law No. 10/2011, of January 20, namely the Legal Framework for Tax Arbitration ("LFTA"), a request for constitution of an arbitral tribunal, in order to declare illegal the additional assessments of Municipal Tax on Onerous Real Property Transfer ("IMPT") and Stamp Duty ("SD"), in the total amount of €8,944.99, under the terms set forth below, with the Tax and Customs Authority ("Respondent" or "TCA") being named defendant:

IMPT Assessment No...., in the amount of €8,143.20;

SD Assessment No...., in the amount of €801.79.

A) Constitution of the Arbitral Tribunal

  1. Pursuant to the provisions of item (a) of paragraph 2 of Article 6 and item (b) of paragraph 1 of Article 11 of the LFTA, the Ethics Council of this Administrative Arbitration Center ("CAAC") designated the undersigned as sole arbitrator, who communicated acceptance of the appointment within the applicable period, and notified the parties of such appointment on August 14, 2015.

  2. Thus, in accordance with the provisions of item (c) of paragraph 1 of Article 11 of the LFTA, and through the communication of the President of the Ethics Council of CAAC, the Sole Arbitral Tribunal was constituted on August 31, 2015.

B) Procedural History

  1. In the request for arbitral decision, the Claimant petitioned for a declaration of illegality of the assessments mentioned above, relating to an urban property held under a horizontal property regime, located at..., ..., which is registered under property matrix article No...., in the urban property matrix of the parish and municipality of....

  2. The TCA submitted a response, petitioning for the dismissal of the request for arbitral decision, firstly by way of exception, since in its understanding, i) the procedural remedy used by the Claimant is improper and, furthermore, ii) the arbitral tribunal is incompetent ratione materiae.

  3. Furthermore, the Respondent requested that, should the present tribunal not uphold the aforementioned exceptions, the request for arbitral decision be deemed inadmissible for failure to demonstrate any defect of violation of law, requesting that the tax acts under analysis, as they do not violate any legal or constitutional provision, be upheld.

  4. Furthermore, in the context of its response, the TCA recalled that the present tribunal would address only the IMPT assessment, since the SD assessment had meanwhile been annulled (with notification to the Claimant).

  5. By order of January 8, 2016, the Sole Arbitral Tribunal, pursuant to the provisions of item (c) of Article 16 of the LFTA, and following the request of the TCA, decided, without opposition from the parties, that it was not necessary to hold the meeting referred to in Article 18 of the LFTA, as a result of the simplicity of the issues at hand, as well as considering that it had at its disposal all the necessary elements to reach a clear and impartial decision.

  6. It also decided, in accordance with paragraph 2 of Article 18 of the LFTA, that oral submissions were not necessary, as the positions of the parties were clearly defined in their respective pleadings, and set February 27, 2016 as the deadline for the arbitral decision.

  7. The Tribunal was properly constituted and is competent to examine the questions indicated (Article 2, paragraph 1, item (a) of the LFTA), the parties have legal capacity and standing and possess full capacity to sue (Articles 4 and 10, paragraph 2 of the LFTA and Article 1 of Administrative Order No. 112-A/2011, of March 22). No nullities occur and nothing prevents judgment on the merits.

  8. The present proceedings are thus in a condition for a final decision to be rendered.

II. Question to be Decided

  1. As a preliminary matter, it will be necessary to determine whether the two exceptions previously listed occur, as suggested by the Respondent, which may prevent this arbitral tribunal from ruling on the Claimant's request, namely i) the impropriety of the procedural remedy employed by it; and ii) the incompetence of the arbitral tribunal ratione materiae to rule on the request filed by the Claimant.

  2. In this sense, should this tribunal reach that conclusion, it will necessarily have to refrain from examining the respective request for arbitral decision.

  3. Otherwise, this tribunal understands that the fundamental question to be examined and decided regarding the merits of the case, as derived from the parties' procedural submissions, is the following: is the IMPT assessment under analysis an additional assessment, intended to correct an original assessment, as the Claimant argues, or is it, alternatively, an original assessment, as the Respondent proposes?

  4. In this sense, this tribunal aims to determine whether, as the Claimant alleges, the period for making said assessment ends four years after the date of the assessment to be corrected, pursuant to Article 31, paragraph 3 of the IMPT Code, or, alternatively, the aforementioned period ends only eight years after the tax-triggering event occurred or the exemption ceased to be valid, pursuant to Article 35, paragraph 1 of the IMPT Code, as argued by the Respondent's counsel.

III. Finding of Facts and Reasoning Therefor

  1. Having examined the documentary evidence produced, the tribunal finds proven, with relevance to the decision of the case, the following facts:

I. The Claimant acquired the right of superficies of an urban property held under a horizontal property regime, located at..., ... of..., which is registered under property matrix article No...., in the urban property matrix of the parish and municipality of....

II. The Claimant had received, on December 23, 2009, two assessments, of IMPT and SD, respectively, duly adjusted in accordance with the tourist utility status enjoyed by the property in question, which determined that IMPT was not due and SD was reduced to one-fifth of the amount otherwise due.

III. Subsequently, the Claimant received in 2015 the assessments mentioned above, as a result of the revocation of the exemption that said property enjoyed, under the terms previously referred to.

IV. The Respondent, during the course of the present proceedings, has already annulled the additional SD assessment, considering that it had violated the time-bar period provided for by law.

V. The Claimant, as of the date of filing the request for constitution of an arbitral tribunal, had already proceeded to pay the amounts corresponding to said assessments in the total amount of €8,944.99.

  1. The Tribunal's conviction as to the facts found to be proven resulted from the documents attached to the file and contained in the request and the unchallenged allegations of the parties, as specified in the factual findings points set forth above.

  2. There is no material fact relevant to the decision of the case found to be unproven.

IV. On the Law

A) Legal Framework

  1. In light of the subject matter under discussion in the present proceedings, it is important, first and foremost, to list the norms that compose the relevant legal framework, as of the date of occurrence of the facts.

  2. First, and following the exceptions raised by the Respondent, attention should be paid to the connected legal framework.

  3. Thus, Article 2 of the LFTA establishes the scope of the competence of arbitral tribunals, in the following terms:

"1 - The competence of arbitral tribunals comprises the examination of the following claims:

a) the declaration of illegality of acts of tax assessment, self-assessment, withholding at source and payment on account;

b) the declaration of illegality of acts of determination of taxable matter when not giving rise to the assessment of any tax, acts of determination of collectable matter and acts of determination of property values.

2 - Arbitral tribunals decide according to established law, and recourse to equity is prohibited."

  1. The Respondent further makes reference, in the context of its response, to the following articles of the Code of Civil Procedure:

"Article 278

1 - The judge must refrain from examining the claim and shall absolve the defendant of the instance:

a) When he finds the exception of absolute incompetence of the court to be well-founded;

b) When he annuls the entire process;

c) When he considers that any of the parties lacks legal personality or, being incapable, is not properly represented or authorized;

d) When he deems any of the parties to be illegitimate;

e) When he finds any other dilatory exception to be well-founded.

2 - The provision of the preceding number ceases when the process is to be remitted to another court and when the lack or irregularity has been cured.

3 - Dilatory exceptions subsist only so long as their respective lack or irregularity is not cured, pursuant to paragraph 2 of Article 6; even if they subsist, absolution of the instance does not occur when, being intended to protect the interest of one of the parties, no other reason prevents, at the moment of examination of the exception, that the merits of the case be examined and the decision must be entirely favorable to that party.

Article 577

The following are dilatory exceptions, among others:

a) Incompetence, whether absolute or relative, of the court;

b) Nullity of the entire process;

c) Lack of legal personality or legal capacity of any of the parties;

d) Lack of authorization or decision that the plaintiff should have obtained;

e) Illegitimacy of any of the parties;

f) Joinder of plaintiffs or defendants, when the required connection does not exist between the claims as provided for in Article 36;

g) Subjective plurality, subsidiarily, outside the cases provided for in Article 39;

h) Lack of attorney representation by the plaintiff in the proceedings referred to in paragraph 1 of Article 40, and lack, insufficiency or irregularity of mandate by the representative who filed the action;

i) Lis pendens or res judicata."

  1. In parallel, pursuant to Article 20 of Decree-Law No. 423/83, of December 5, IMPT exemptions are granted, and SD is reduced to one-fifth, for acquisitions of properties or autonomous units intended for the installation of enterprises qualified as tourist utility ventures, even if such qualification is attributed on a preliminary basis, provided that it remains valid (…)".

  2. Since the core question is mainly related to determining whether the assessment in question is, or is not, an additional assessment, see also what results from Article 102 of the Tax Procedure and Process Code ("TPPC"):

"Article 102

1 - The challenge shall be filed within three months from the following dates:

a) End of the period for voluntary payment of tax obligations legally notified to the taxpayer;

b) Notification of other tax acts, even when not giving rise to any assessment;

c) Service of summons on subsidiary liable parties in tax execution proceedings;

d) Formation of the presumption of implicit rejection;

e) Notification of other acts that may be subject to autonomous challenge pursuant to this Code;

f) Knowledge of acts harmful to legally protected interests not covered in the preceding items.

2 - (Repealed by item (d) of Article 16 of Law No. 82-E/2014, of December 31)

3 - If the basis is nullity, the challenge may be filed at any time.

4 - The provision of this article does not prejudice other special periods set forth in this Code or in other tax laws."

  1. Finally, it will also be necessary to examine the relevant norms of the IMPT Code, namely with respect to the legally established periods for assessments:

"Article 31

1 - In case of omission of property or values subject to taxation or where there are well-founded indications that acts or contracts were performed or executed with the objective of reducing the tax debt or of obtaining other undue advantages, the correction powers attributed to the tax administration by the present Code or by other tax laws apply.

2 - When it is found that assessments contained an error of fact or law, resulting in prejudice to the State, as well as in cases where appraisal is required, the head of the tax service office where the assessment was made or where the declaration was filed for purposes of paragraph 3 of Article 19, shall promote the corresponding additional assessment.

3 - The assessment may only be made until four years have elapsed from the assessment to be corrected, except if it is due to omission of property or values, in which case it may still be made later, being preserved in all cases the provision of Article 35.

4 - The additional assessment must be notified to the taxpayer, pursuant to the provisions of the Tax Procedure and Process Code, in order to effect payment and, where applicable, be able to use the defense remedies provided therein.

Article 35

1 - Tax may only be assessed within eight years following the transfer or the date on which the exemption ceased to be effective, without prejudice to the provision of the following number and, as to the rest, Article 46 of the General Tax Law.

2 - Being unknown the quota of the co-heir transferor, for purposes of Article 26, to the eight years shall be added the time the unknown status has lasted.

3 - In acts or contracts by authenticated private document, or any other title, when such form is permitted as an alternative to a public deed, the period of extinction of the tax due is counted from the date of promotion of the property registration."

  1. Thus, it is fundamentally within the present legal framework that it is important, first and foremost, to decide whether the exceptions raised by the Respondent should be upheld, with this tribunal refraining from examining the Claimant's request.

  2. In parallel, and should this not be the case, this tribunal shall then determine whether the present assessment is an additional assessment or, alternatively, an original assessment and, in sequence, validate the respective period to be considered, for purposes of the assessment now being challenged.

B) Arguments of the Parties

  1. In light of the question to be examined, in the scope of the present arbitral proceedings, the Claimant, in its request, alleges, in summary, the following:

  2. "(…) to the enterprise in which the autonomous unit whose right of superficies was acquired by the now Claimant is integrated, tourist utility was attributed on a preliminary basis (…)".

  3. In that sense, "the tax administration (…) declared, on December 23, 2009, pursuant to Article 20 of Decree-Law No. 423/83, of December 5, the exemption from IMPT and the reduction of SD to one-fifth (…), on which a revocation order was issued, which gave rise to the challenged assessment (…)".

  4. Now, the Claimant emphasizes that "(…) the order revoking the tax benefits recognized by the assessment of December 23, 2009 was issued on February 18, 2015 (…)", having, in that sense, more than five years elapsed since the issuance of the first assessment.

  5. In this manner, the Claimant considers that, pursuant to Article 79 of the General Tax Law ("GTL") and Articles 138 et seq. of the Administrative Procedure Code ("APC"), "valid administrative acts are not freely revocable when, as is the case, 'they are constitutive of rights or legally protected interests' and acts that have been unfavorable to the interests of their beneficiaries are not at stake".

  6. The Claimant further recalls that "the change of understanding between 2009 and 2015 with which the information and order cited above sustained the filing of the challenged assessment could not even invoke the four-year period – in fact already greatly exceeded – provided for in paragraph 1 of the aforementioned Article 78 to, on the basis of 'error attributable to the services,' sustain the revision of the assessment (…)".

  7. Finally, the Claimant calls attention to the following: "in fact, even if it were considered that in the assessment of December 23, 2009 an error of fact or law was committed – a fact which, it is repeated, was not invoked by the order that sustained the challenged assessment – from which prejudice to the State resulted, nonetheless, by imperative of the special rule provided for in paragraph 3 of Article 31 of the IMPT Code (also applicable to SD), the additional assessment 'may only be made until four years have elapsed from the assessment to be corrected (…)".

  8. In light of what was set forth in the preceding number, the Claimant contests the argument advanced by the Respondent in the context of the order that substantiated the assessment that it now seeks to challenge, in which it was stated that such assessment was made within the general eight-year period provided for in Article 35 of the IMPT Code, asserting that "the IMPT exemption (and SD reduction) was not subject to any future condition nor was it limited to any period so that, following the verification of that condition or after the expiration of the period, the aforementioned eight-year period could then begin to run for the assessment to take effect".

  9. The Claimant concludes its request by requesting, in addition to the annulment of the additional assessments referred to previously, the payment of indemnity interest.

  10. Already in the context of final submissions, the Claimant further contested the TCA's response, saying, namely, that "the truth is that the arguments presented by the Respondent have no consistency whatsoever; in fact, (…) it is sufficient (…) to read the petition to the end to conclude that its object is an additional IMPT assessment (…)", thus seeking to reinforce the arguments already made in its initial petition.

  11. The Claimant also warns, in the context of final submissions, that "the TF [Finance Service] revoked the additional SD assessment for having recognized that it violated the time-bar period for such assessment. Curiously, in this case, there was no hesitation in invoking a rule that stipulates the time-bar period for filing additional assessments and which the TCA itself recognized it had violated".

  12. For its part, the Respondent, after being duly notified for this purpose, submitted its response in which it stated ab initio that the present request would address only the IMPT assessment, since the SD assessment previously referred to had been "meanwhile the subject of annulment by the Respondent, a fact that would already be known to the Claimant".

  13. It then began by considering that "(…) the Claimant seeks to graft a Special Administrative Action onto the present request for arbitral decision. However, this is not legally possible, and the Sole Arbitral Tribunal must refrain from knowing the request, since the procedural remedy used by the Claimant does not allow for the examination thereof".

  14. Still within the scope of the exceptions, the Respondent also considers that this arbitral tribunal is incompetent since "the examination of any questions relating to the recognition of tax exemptions falls outside the jurisdiction of tax arbitration, under penalty of violation of law".

  15. In another respect, the Respondent says nothing about the legally established periods for the correction of an IMPT or SD assessment, referring only to the fact that "in tourist enterprises established under plural ownership, as is the case under examination, two distinct procedures stand out: that of 'installation,' relating to the performance of operations necessary to install the enterprise, and another, that of 'operation,' which comprises all operations necessary to place it in operation and to its operation, and that the sale of the projected or constructed units necessarily forms part of the second."

  16. In this sense, for the Respondent, "the IMPT exemption only has justification with respect to those who proceed with the installation of the enterprise and place it on the market and not in relation to all who use and operate it, even if through the purchase of its units," concluding that the assessment in question is not affected by any illegality and should, as such, remain in the legal system.

  17. Note that this understanding came following the publication of Decision No. 3/2013, of January 23, of the Supreme Administrative Court.

  18. Thus, the Respondent requested that the Claimant's claim be found to be inadmissible, with the appropriate legal consequences.

  19. Already in the context of its final submissions, in addition to making reference to some arbitral decisions, namely arbitral decision No. 381/2015-T, of January 21, 2016, which it attached to its file (which we shall examine, due to its relevance to the case, in more detail below), the Respondent seeks to contest one of the points raised by the Claimant, stressing that "the Claimant alleges (cf. Article 4) that the extinction of the right to assess would always in itself constitute a defect that determines the annulment of the IMPT assessment sub judice. Once again the Claimant is without merit.

As is documented in the Administrative Process, the document No...., of 2009-12-23, in the amount of €0.00 (zero Euros and zero cents), does not constitute any original assessment. In fact, one need only pay attention to its monetary value to ascertain this. The aforementioned document constitutes, rather, the notification of the (now found to be improper) grant of the tax benefit contested herein.

As, moreover, it states, by referring, clearly and expressly, to the following:

'Benefits: 33 – Tourist Utility (Art. 20 of D.L. 423/83), 100% on collectable matter'

From this it follows that the applicable norm is not the one proclaimed in paragraph 3 of Article 31 of the CIMT [IMPT Code], which establishes a time-bar period of four years – since, as has been said, the document No...., of 2009-12-23, does not constitute an original assessment… But rather paragraph 1 of Article 35 of the CIMT, which establishes a time-bar period of eight years.

Well then, considering that the tax-triggering event occurred on 2010-01-05 and that the assessment now placed in question by the Claimant was issued on 2015-01-07, it must be concluded that the eight-year period set forth in the aforementioned paragraph 1 of Article 35 of the CIMT was fully observed."

C) Tribunal's Examination

  1. Before addressing the question properly, this tribunal will analyze the exceptions raised by the Respondent in the scope of the present proceedings.

  2. As has been previously stated, the TCA contends, on one hand, that the Claimant should have resorted to a special administrative action for purposes of the present subject, since its objective is "that the Arbitral Tribunal render a decision in the sense of recognition of the IMPT exemption that it claims to deserve".

  3. In fact, "in light of this claim, it is the Special Administrative Action that configures the appropriate procedural remedy for the examination of the matter (since it constitutes the means of reaction intended to examine acts in tax matters (…) and not the request for arbitral decision (since this constitutes one of the means of reaction intended to examine tax acts…)".

  4. Thus arguing that "the Sole Arbitral Tribunal must refrain from examining the request, since the procedural remedy used by the Claimant does not allow for the examination thereof. The impropriety of the procedural remedy constitutes a dilatory exception that prevents the continuation of the process, leading to absolution of the instance as to the claim in question (…)".

  5. Before addressing the following exception, this tribunal recalls that it is within its scope of competence, pursuant to Article 2 of the LFTA, to examine "the declaration of illegality of acts of tax assessment, self-assessment, withholding at source and payment on account".

  6. In this sense, being faced with a request for arbitral decision that specifically aims at the declaration of illegality of an act of tax assessment, in this case assessment No...., this tribunal cannot understand why it would be incompetent to analyze the subject matter.

  7. In fact, it does not seem reasonable to assume, on the basis of any procedural error by the Claimant, that the present request falls outside the scope of this tribunal's competence.

  8. By way of example only, note the conclusion of the Claimant's initial petition: "in these terms and in such terms as shall be duly supplied, the present challenge should be found well-founded, as proven, determining the annulment of the additional IMPT and SD assessment (…)", which demonstrates, in an express manner, the act that the Claimant seeks to challenge.

  9. To reinforce this tribunal's understanding, note arbitral decision No. 381/2015-T, of January 26, recently published and attached to the proceedings by the Respondent, which ruled on the exception examined above, which we endorse and, due to its proximity to the subject matter analyzed, will closely follow throughout the present decision.

  10. "That said and entering into the procedural analysis of the question under examination, we have that it follows from the provision in item (p) of paragraph 1 of Article 97 of the TPPC, in the part that is relevant to consider herein, that the special administrative action is the appropriate procedural remedy when the act to be challenged is that of total or partial rejection or revocation of exemptions or other tax benefits, when dependent on recognition by the tax administration.

It is thus unequivocal that the legislator included in the scope of the referral to the special administrative action only the challenge of tax benefits dependent on recognition, leaving out, therefore, automatic tax benefits.

Examining the ratio legis of this legal norm, Nuno Cerdeira Ribeiro (The Judicial Review of Acts of the Tax Administration, Coimbra, Almedina, 2014, p. 213) advances that it may reside, first and foremost, in the fact that automatic tax benefits are often 'considered in a broader procedure of assessment, which results in the issuance of a tax act stricto sensu'; since then 'the tax benefit is inserted in the assessment procedure, the act here challengeable will be this latter, through the process of judicial review, and it is in that forum that the taxpayer may attack the legality of the assessment on the basis of the failure to consider or the erroneous consideration of the benefit in question, which vitiates the final act'.

Wholly adhering to this doctrinal understanding and applying it to the concrete case, which fits perfectly within it, we consider that the present proceedings is the appropriate procedural remedy for examining the claim filed by the Claimant, pursuant to the provision in Article 2, paragraph 1, item (a), of the LFTA, to the extent that it is embodied in the declaration of illegality and consequent annulment of the referenced IMPT assessment (on the basis of the illegal revocation of an exemption and the extinction of the right to assess).

In these terms, without need for further considerations, the exception of procedural error is found to be inadmissible."

  1. Next, let us examine the second exception raised by the Respondent, which concerns the fact that "the examination of any questions relating to the recognition of tax exemptions falls outside the jurisdiction of tax arbitration, under penalty of violation of law".

  2. Now, in the concrete case, and as has already been previously stated, this tribunal's challenge does not relate to examining any subject related to tax benefits. In fact, paying attention to what was previously referred to, we are faced with an assessment issued by the TCA, which this tribunal must only examine whether it is an additional assessment or an original assessment.

  3. Having considered the foregoing, and not accepting the claims raised by the Respondent, by way of exception, it is now important to analyze the question properly.

  4. First and foremost, it is important to confront the understanding advocated by the Claimant, in the scope of its initial request, when it states that the IMPT assessment is illegal because it implies the revocation of an administrative act granting tax benefits.

  5. For this purpose, we shall once again resort to the arbitral decision cited above.

"The Claimant alleges that the act of IMPT assessment challenged is illegal because it presupposes the revocation of an administrative act granting a tax benefit, which, in its understanding, violates the provision in Articles 140 and 141 of the APC (version prior to the publication of Decree-Law No. 4/2015, of January 7), namely with respect to the period for revocation of the act.

As has already been made explicit above, the tax benefit in question in these proceedings – exemption from IMPT for acquisitions of properties or autonomous units intended for the installation of enterprises qualified as tourist utility ventures – since it results directly and immediately from law, is of automatic application, provided that the conditions set forth in paragraph 1 of Article 20 of Decree-Law No. 423/83, of December 5, are satisfied.

Therefore, the effectiveness of that tax benefit is not dependent on any administrative act of recognition, capable of revocation under the terms and periods provided for in the legal norms cited by the Claimant.

In these terms, the alleged illegal revocation of an administrative act of recognition of tax benefits is unfounded."

  1. In parallel, it should be recalled that the arguments put forth by the Claimant and Respondent ultimately boiled down to whether or not the assessment in question is an additional assessment.

  2. It appears settled that the Claimant accepted, at least no part of its exposition suggests otherwise, that it enjoyed a tax benefit erroneously granted.

  3. In fact, it (Claimant) structures its argument in the sense of considering that the revocation of the tax benefit, and subsequent IMPT assessment, despite being conceptually valid, cannot be done as a matter related to periods.

  4. This is because, in the understanding of the same, we are faced with an additional assessment, intended to correct an initial assessment, framing it within the scope of Article 31, paragraph 3 of the IMPT Code, for purposes of counting the period for issuing the same.

  5. For its part, the Respondent, in arguing that the assessment issued is an original assessment, understands that the legal period for issuing the assessment is eight years, in accordance with what follows from Article 35, paragraph 1 of the IMPT Code.

  6. It is thus important, ab initio, to state that, in the view of this tribunal, the challenged assessment is not an additional assessment, insofar as the tax act that it seeks to correct did not assess any tax.

  7. Therefore, and notwithstanding the fact that the Respondent, in the assessment it sent, after concluding that the exemption after all was not applicable, included the following note: "in this manner the IMPT assessment No...../2009 ceases to be effective", the fact is that one cannot consider that act as an act of tax assessment.

  8. Note that the act in question is, without a shadow of a doubt, a tax act. However, it cannot be classified, for purposes of the present discussion, as an act of tax assessment, which would lead to classifying the challenged assessment as an additional assessment.

  9. Article 102 of the TPPC, raised in the discussion by the Claimant, establishes, in item (b) of paragraph 2, the possibility of challenging other tax acts, "even when not giving rise to any assessment".

  10. Now, while it is clear that an act of tax assessment is a tax act, the opposite is not necessarily true.

  11. In this manner, being unable to classify the aforementioned act as an additional assessment, it will not be possible to apply the period provided for in Article 31, paragraph 3 of the IMPT Code, as the Claimant advocates.

  12. Having concluded this point, it is now important to validate whether IMPT could have been assessed pursuant to Article 35, paragraph 1 of the IMPT Code.

  13. In the words of J. Silvério Mateus and L. Corvelo de Freitas[1], "(…) a different period of extinction was established for IMPT than the general period provided for in paragraph 1 of Article 45 of the GTL. This special period rises to eight years, that is, to double the general extinction period set forth in that law. Being a tax of single obligation, the counting of the period of extinction of the right to assess begins from the date on which the tax-triggering event occurred (…) which, pursuant to paragraph 2 of Article 5, is that in which, in accordance with the provisions of Articles 2 and 4, transmission (…) occurs."

  14. In the concrete case, the tax-triggering event giving rise to the tax occurred with the acquisition of the property, on January 5, 2010.

  15. In this sense, given that the challenged assessment bears the date of March 17, 2015, it is timely, and thus the Claimant's request cannot proceed.

  16. Finally, a last note must be made, out of respect for the SD assessment that was annulled.

  17. In fact, as early as 2009, an SD assessment had been made, albeit partial (one-fifth of the amount due), so that, in that specific case, one could say that we were, already at that date, faced with an act of tax assessment (albeit reduced, an amount was assessed).

  18. Now, being faced with an act of original assessment (in 2009), the assessment subsequently made (in 2015) naturally assumes the character of an additional assessment, and thus must be made within the time period imposed by Article 31, paragraph 3 of the IMPT Code.

  19. In this manner, not having been done, the Respondent had no other option but to proactively annul the same (under penalty of it being declared illegal in the present tribunal).

  20. In summary, and returning to the subject initially under discussion (IMPT assessment), given that the transfer occurred less than eight years ago, satisfying the requirement set forth in Article 35, paragraph 1 of the IMPT Code, the present assessment should proceed, as it is not affected by any illegality.

V. Decision

  1. Accordingly, this Arbitral Tribunal decides:

A) To find the request for arbitral decision inadmissible and, in consequence, to declare legal the IMPT assessment mentioned above, from which resulted tax to be paid in the amount of €8,143.20, which amount, in our understanding, has already been assessed;

B) To order the Claimant to pay the costs of the proceedings.

VI. Value of the Proceedings

  1. The value of the proceedings is fixed at €8,143.20 (adjusted for the amount corresponding to the SD assessment meanwhile annulled), pursuant to Article 97-A, paragraph 1, item (a), of the TPPC, applicable by virtue of items (a) and (b) of paragraph 1 of Article 29 of the LFTA and paragraph 2 of Article 3 of the Regulation of Costs in Tax Arbitration Proceedings ("RCPAT").

VII. Costs

  1. In accordance with the provision in Article 22, paragraph 4, of the LFTA, the amount of the arbitration fee is fixed at €918, pursuant to Table I of the aforementioned Regulation, at the charge of the Claimant, given the complete inadmissibility of the request.

Let notification be made.

Lisbon, CAAC, February 26, 2016

The Arbitrator

(Sérgio Santos Pereira)

[1] See Property and Real Estate Taxes and Stamp Duty, pages 485 and 486, by J. Silvério Mateus and L. Corvelo de Freitas.

Frequently Asked Questions

Automatically Created

What IMT and Stamp Duty exemptions apply to properties classified with tourist utility in Portugal?
Properties classified with tourist utility status in Portugal benefit from significant tax advantages under the IMT Code. Specifically, IMT (Municipal Tax on Onerous Real Property Transfer) is not due on acquisitions of properties with this classification, and Stamp Duty is reduced to one-fifth (20%) of the amount that would otherwise be payable. These exemptions recognize the public interest in promoting tourism infrastructure and incentivize investment in qualifying tourist accommodations. However, these benefits are conditional upon maintaining the tourist utility classification; if the classification is revoked or the property ceases to qualify, the Tax Authority may issue assessments to collect the taxes that were initially exempted or reduced.
Can taxpayers challenge additional IMT assessments on tourist utility properties through CAAD arbitration?
Yes, taxpayers can challenge additional IMT assessments on tourist utility properties through CAAD (Administrative Arbitration Center) arbitration under the Legal Framework for Tax Arbitration (Decree-Law 10/2011). Article 2(1)(a) of the LFTA grants arbitral tribunals jurisdiction to examine claims for declaration of illegality of tax assessment acts, including IMT assessments. However, the Tax Authority may raise preliminary objections to arbitral jurisdiction, arguing either that the procedural remedy is improper or that the tribunal lacks jurisdiction ratione materiae depending on the specific nature of the challenge. Taxpayers must file their arbitration requests within the statutory deadlines and demonstrate that the assessment violates legal provisions.
What happens when the Tax Authority annuls a Stamp Duty assessment during arbitration proceedings?
When the Tax Authority annuls a Stamp Duty assessment during arbitration proceedings, that specific assessment is removed from the scope of the arbitration case, and the tribunal no longer needs to rule on its legality. In this case, the Tax Authority recognized during proceedings that the additional Stamp Duty assessment violated the applicable limitation period and voluntarily annulled it, notifying the Claimant accordingly. This left only the IMT assessment under review by the arbitral tribunal. The annulment represents an acknowledgment by the Tax Authority that the assessment was illegal, and the taxpayer is entitled to reimbursement of any amounts paid relating to that annulled assessment, without requiring a formal tribunal decision on that particular tax.
How does the CAAD arbitral tribunal assess the legality of additional IMT liquidations on real estate transfers?
The CAAD arbitral tribunal assesses the legality of additional IMT liquidations by examining whether the assessments comply with substantive and procedural legal requirements. The critical analysis involves determining the legal characterization of the assessment: whether it constitutes an 'additional assessment' (liquidação adicional) intended to correct an original assessment, or an 'original assessment' (liquidação originária). This distinction is crucial because different limitation periods apply: Article 31(3) of the IMT Code establishes a four-year period for additional assessments calculated from the date of the assessment being corrected, while Article 35(1) establishes an eight-year period for original assessments from the tax-triggering event or cessation of exemption. The tribunal examines the factual and legal circumstances surrounding both the original and subsequent assessments to determine proper classification and whether the limitation period was respected.
What procedural defenses can the Tax Authority raise in CAAD arbitration cases involving IMT on tourist properties?
In CAAD arbitration cases involving IMT on tourist properties, the Tax Authority can raise several procedural defenses, including: (i) impropriety of the procedural remedy (inadequação do meio processual), arguing that tax arbitration is not the appropriate forum for the specific type of challenge brought by the taxpayer; (ii) lack of jurisdiction ratione materiae (incompetência material) of the arbitral tribunal, contending the subject matter falls outside the scope of arbitral competence defined in Article 2 of the Legal Framework for Tax Arbitration; and (iii) failure to demonstrate a legal defect (falta de demonstração de vício), arguing the taxpayer has not proven any violation of legal or constitutional provisions by the tax assessments. These exceptions are considered preliminary matters that, if upheld, would prevent the tribunal from examining the merits of the case and result in dismissal of the arbitration request.