Process: 389/2018-T

Date: February 12, 2019

Tax Type: IMI

Source: Original CAAD Decision

Summary

This CAAD arbitral decision (Process 389/2018-T) addresses an IMI (Municipal Property Tax) exemption dispute concerning properties located in the Alto Douro Wine Region UNESCO World Heritage site. The claimant, A... S.A., challenged IMI assessments from 2012 to 2015 totaling over €214,000, arguing entitlement to exemption under Article 44(1)(n) of the Portuguese Tax Benefits Statute (EBF) for properties within classified heritage zones. The Tax Authority raised a preliminary objection claiming the tribunal lacked material competence because the case followed a refused official review request rather than direct administrative complaint. The arbitral tribunal rejected this exception, clarifying that while self-assessment acts require prior administrative remedies under Article 2(a) of Ministerial Order 112-A/2011, standard IMI assessments can be challenged directly through CAAD arbitration under Article 2(1)(a) of the RJAT, regardless of prior official review procedures. This ruling establishes important jurisprudence on CAAD's jurisdiction over IMI assessment challenges and the procedural requirements for tax arbitration. The substantive issue involves interpreting the scope of IMI exemptions for UNESCO heritage properties and potential constitutional questions regarding Article 44(1)(n) EBF's application. The decision has significant implications for taxpayers owning properties in classified heritage areas seeking tax relief and demonstrates the accessibility of tax arbitration as an alternative dispute resolution mechanism in Portugal, even after exhausting administrative review procedures.

Full Decision

ARBITRAL DECISION

I – REPORT

A..., S.A., legal entity no..., with registered office at Rua do..., no..., ... (hereinafter referred to as "Claimant"), has, under article 2º no 1, subsection a) and articles 10º et seq. of the Legal Regime of Tax Arbitration, provided for in Decree-Law no 10/2011, of 20 January, as amended by article 228º of Law no 66-B/2012, of 31 December (hereinafter abbreviated as "LRTA") and articles 1º and 2º of Order no 112-A/2011, of 22 March, filed a request for an arbitral pronouncement regarding the legality of the decision refusing the request for Official Review and regarding the partial legality of the following Municipal Property Tax (IMI) assessments (doc. 1 attached with the arbitral request), relating to the years 2012 to 2015:

  • Assessment no 2012... in the amount of €56,308.16 with payment date of 7 May 2013;

  • Assessment no 2013... in the amount of €51,959.83 with payment date of 5 July 2014;

  • Assessment no 2014... in the amount of €52,012.40 with payment date of 25 February 2015; and

  • Assessment no 2015... in the amount of €54,568.58 with payment date of 26 February 2016;

seeking the declaration of their partial illegality and consequent partial annulment, as well as the reimbursement of the amount unduly paid, plus indemnification interest.

The Tax and Customs Authority (AT) is the Respondent.

The request for constitution of the arbitral tribunal was accepted by the President of CAAD and automatically notified to the Respondent on 16.08.2018.

The Claimant did not appoint an arbitrator, whereupon, pursuant to subsection a) of no 2 of article 6º and subsection b) of no 1 of article 11º of the LRTA, the President of the Deontological Board of CAAD appointed the undersigned as arbitrator of the sole arbitral tribunal, who communicated acceptance of the appointment within the applicable period.

On 01.10.2018, the Parties were duly notified of this appointment and expressed no intention to challenge the appointment of the arbitrator, in accordance with the combined provisions of article 11º, no 1, subsections a) and b), of the LRTA and articles 6º and 7º of the Deontological Code.

Thus, in compliance with the provision of subsection c) of no 1 of article 11º of the LRTA, the Arbitral Tribunal was constituted on 22.10.2018.

Duly notified, the Tax and Customs Authority filed a response in which it defended the lack of merit of the request, raising exceptions and objections.

As it was understood that there is no dispute regarding the essential and relevant facts for the decision and which have sufficient documentary support, the hearing referred to in article 18º of the LRTA was dispensed with.

The parties submitted written submissions, pronouncing themselves on the evidence produced, reiterating and developing their respective legal positions.

II – PRELIMINARY RULING

The Parties have legal personality and capacity, are legitimate as to the request for arbitral pronouncement and are duly represented, in accordance with the provisions of articles 4º and 10º of the LRTA and article 1º of Order no 112-A/2011, of 22 March.

Regarding the question of the competence of the Arbitral Tribunal to assess the request for arbitral pronouncement filed by the Claimant, the Respondent raised the exception of material incompetence of this Arbitral Tribunal arising from the fact that the request for arbitral pronouncement was filed following the refusal of a request for official review.

According to the AT, "such matter is outside the competence reserved to it by law" and is circumscribed in article 2º, no 1 of the LRTA, expressly excluding claims relating to the declaration of illegality of acts of self-assessment, withholding at source and payment on account that have not been preceded by recourse to the administrative remedy, in accordance with articles 131º to 133º of the Code of Tax Procedure and Process (CPPT). The AT thus argues that this is the case: because there was no recourse to the administrative remedy "all assessments subject to a request for Official Review cannot be assessed by the Sole Arbitral Tribunal".

It is true that article 2º, subsection a) of Order 112-A/2011, of 22 March, excludes from the scope of the Respondent's binding to arbitral jurisdiction, "(…) claims relating to the declaration of illegality of acts of self-assessment, withholding at source and payment on account that have not been preceded by recourse to the administrative remedy in accordance with articles 131º to 133º of the Code of Tax Procedure and Process".

However, in the case at hand, this concerns acts of assessment and not of "self-assessment, withholding at source and [or] payment on account".

Accordingly, the aforementioned subsection a) of article 2º of Order 112-A/2011, of 22 March, is not applicable in the case sub judice, and the legality of acts of IMI assessment may be assessed by this Tribunal, by virtue of the provision of article 2º, no 1, subsection a), of the LRTA, regardless of whether these have or have not been subject to a gracious complaint or request for official review or hierarchical appeal, as there is no limitation in either the LRTA or Order no 112-A/2011, of 22 March.

This exception of incompetence therefore lacks merit.

Besides the exception of material incompetence of this Arbitral Tribunal, raised by the Respondent and held to lack merit by this Tribunal, no other exceptions requiring consideration were raised.

This arbitral tribunal is materially competent.

There are no nullities, so it is necessary to proceed next to examine the merits of the request.

III. MERITS

FACTUAL MATTERS

Facts Proven

The Tribunal considers the following facts to be proven:

  • The Alto Douro Wine Region, in the category of Cultural Landscape, encompassing the municipalities of ..., ..., ..., ..., ..., ..., ..., ..., ..., ..., ..., ... and ..., was included, in 2001, in the UNESCO World Heritage Tentative List;

  • In the Official Journal (Diário da República), II Series, of 30-07-2010, Notice no 15170/2010, dated 22.07.2010, a copy of which is attached as document no 4 with the request for arbitral pronouncement, was published, the content of which is reproduced here, which states, among other things, the following:

1 – Pursuant to and for the purposes of the provision of no 3 of article 72º of Decree-Law no 309/2009, of 23 October, it is hereby made public that, in 2001, the Alto Douro Wine Region, in the category of Cultural Landscape, encompassing the municipalities of..., ..., ..., ..., ..., ..., ..., ..., ..., ..., ..., ... and ... was included in the UNESCO World Heritage Tentative List.

2 – The location plan, including the respective special protection zone, is published in Annex I, and the location plan is published in Annex II.

  • The Claimant filed, on 06.03.2017, a request for Official Review of the following IMI assessments (doc. 1 attached with the arbitral request), relating to the years 2012 to 2015:

  • Assessment no 2012... in the amount of € 56,308.16 (the collection for the properties identified below being € 623.68), with payment date of 7 May 2013;

  • Assessment no 2013... in the amount of €51,959.83 (the collection for the properties identified below being € 623.68), with payment date of 5 July 2014;

  • Assessment no 2014... in the amount of €52,012.40 (the collection for the properties identified below being € 623.68), with payment date of 25 February 2015;

  • Assessment no 2015... in the amount of €54,568.58 (the collection for the properties identified below being € 623.68), with payment date of 26 February 2016.

  • The aforementioned assessments relate to the following properties of which the Claimant is the owner:

[Table of properties - details redacted]

  • By order of 18.05.2018 (doc. 3 attached with the arbitral request), the Director of Finance of ..., decided on the lack of merit of the Official Review, arguing that:

  • "…. none of the properties subject to the request, owned by the claimant, was subject to the prior classification procedure, or was the subject of a government decree declaring such classification";

  • "…. What obtained worldwide recognition was an intangible asset, constituted by the landscape and by the people who created it and not a set of properties (rural or urban), therefore the requirements for the invoked exemption, included in article 44º, no 1, subsection n) of the EBF, cannot be considered as met, as it is not in the spirit of the legislator, in the tax context, to grant collective exemptions from IMI, particularly in this specific case, where it was the Cultural Landscape that was declared to be of national interest (in the context of cultural heritage law) and not the properties that punctuate that landscape";

  • "… although the properties of the Claimant are located within the group known as "Alto Douro Wine Region", in the category of Cultural Landscape, they do not, however, merit, solely on that basis, the individual classification of being of public interest or a national monument, as they are not individually classified in accordance with the combined provisions of no 1, of article 72º, of DL 309/2009, of 23 October and no 1, of article 28º of the LPC, therefore not meeting the requirement leading to the benefit of the exemption provided for in subsection n), of no 1, of article 44º of the EBF;

  • "Furthermore, and contrary to what is argued by the claimant, the legislator, in referring to the classification of National Monument, in subsection n) of no 1 of article 44º of the EBF, would intend to refer to the classification emanating from the legislation preceding the Cultural Heritage Law (Decree no 20985, of 7 March 1932) ";

  • "... only the properties, considered in their individuality, in their separability and in their economic viability, are capable of benefiting from the IMI exemption, nor is it foreseen, in the EBF rule, a collective scope of the exemption for all properties inserted in a given zone/region (…) as is the case with the Alto Douro Wine Region".

  • The properties for which the Claimant seeks to apply the IMI exemption are located in the municipality of ....

  • The property registered in the rustic land register under article …º of the parish of … is, pursuant to no 7 of article 15º of Law no 107/2001 of 08.09.2001, classified as a National Monument, forming an integral part of the ensemble designated as Alto Douro Wine Region, classified as a National Monument, as certified in a certificate issued on 21.02.2017 by the Regional Directorate of Culture of the North for the purpose of instructing a process for obtaining tax benefits - IMI exemption (doc. 4 attached with the request for constitution of the Arbitral Tribunal).

  • The property registered in the rustic land register under article ... of the parish of ..., is, pursuant to no 7 of article 15º of Law no 107/2001 of 08.09.2001, classified as a National Monument, forming an integral part of the ensemble designated as Alto Douro Wine Region, classified as a National Monument, as certified in a certificate issued on 21.02.2017 by the Regional Directorate of Culture of the North for the purpose of instructing a process for obtaining tax benefits - IMI exemption (doc. 4 attached with the request for constitution of the Arbitral Tribunal).

  • The property registered in the rustic land register under article ... of the parish of..., is, pursuant to no 7 of article 15º of Law no 107/2001 of 08.09.2001, classified as a National Monument, forming an integral part of the ensemble designated as Alto Douro Wine Region, classified as a National Monument, as certified in a certificate issued on 21.02.2017 by the Regional Directorate of Culture of the North for the purpose of instructing a process for obtaining tax benefits - IMI exemption (doc. 4 attached with the request for constitution of the Arbitral Tribunal).

  • The property registered in the urban land register under article ... of the parish of ..., is, pursuant to no 7 of article 15º of Law no 107/2001 of 08.09.2001, classified as a National Monument, forming an integral part of the ensemble designated as Alto Douro Wine Region, classified as a National Monument, as certified in a certificate issued on 21.02.2017 by the Regional Directorate of Culture of the North for the purpose of instructing a process for obtaining tax benefits - IMI exemption (doc. 4 attached with the request for constitution of the Arbitral Tribunal).

  • The property registered in the urban land register under article ... of the parish of ..., is, pursuant to no 7 of article 15º of Law no 107/2001 of 08.09.2001, classified as a National Monument, forming an integral part of the ensemble designated as Alto Douro Wine Region, classified as a National Monument, as certified in a certificate issued on 21.02.2017 by the Regional Directorate of Culture of the North for the purpose of instructing a process for obtaining tax benefits - IMI exemption (doc. 4 attached with the request for constitution of the Arbitral Tribunal).

  • The property registered in the urban land register under article ... of the parish of ..., is, pursuant to no 7 of article 15º of Law no 107/2001 of 08.09.2001, classified as a National Monument, forming an integral part of the ensemble designated as Alto Douro Wine Region, classified as a National Monument, as certified in a certificate issued on 21.02.2017 by the Regional Directorate of Culture of the North for the purpose of instructing a process for obtaining tax benefits - IMI exemption (doc. 4 attached with the request for constitution of the Arbitral Tribunal).

  • The aforementioned IMI assessments were paid in full by the Claimant (p. 38 of the Administrative File).

  • On 16.08.2018, the Claimant filed the request for constitution of the arbitral tribunal that gave rise to the present proceedings.

Facts Not Proven

There are no facts relevant to the decision of the case that have not been proven.

1.3. Reasoning regarding the facts

The facts proven are based on the documents attached by the Claimant with the request for arbitral pronouncement and on the Administrative File.

LEGAL MATTERS

§1. Issues to be decided

A - Regarding the partial legality of the IMI assessments

The principal issue to be decided is whether the tax acts of IMI assessment relating to the years 2012, 2013, 2014 and 2015 are partially illegal, insofar as the properties identified above, to which they relate, are classified as National Monuments since they are integrated into the Alto Douro Wine Region, considered as UNESCO World Heritage, and if, to that extent, they would meet the requirements established in law to enjoy the IMI exemption enshrined in article 44º, no 1, subsection n) of the EBF.

The Claimant argues that, integrating such properties, the Alto Douro Wine Region – UNESCO World Heritage – the same are classified as a national monument, in accordance with the combined interpretation of the provisions of nos 3 and 7 of article 15º of Law 107/2001, of 8 September. And since these are national monuments, the properties are exempt from IMI, pursuant to the provisions of article 44º, no 1, subsection n) of the Tax Benefits Statute (EBF). For which reason, the IMI assessments in issue, insofar as they concern the properties above referred to, appear manifestly illegal as they rest on an error as to the requirements.

For its part, the AT, in its Response to the arbitral request, contends for the legality of the IMI assessments and the legality of the order refusing the official review request, arguing that:

a) Category, classification and designation are distinct concepts;

b) There is no classification called National Monument, but only classifications called National Interest, Public Interest or Municipal Interest, therefore it is manifestly impossible to state that the cultural landscape of the Alto Douro Wine Region is classified as a National Monument;

c) The Claimant confuses the designation "national monument" with the classification of "national monument" that existed between the entry into force of Decree 20.985 of 1932 and the entry into force of the LBPC in 2001;

d) There is no UNESCO classification called "Humanity's Heritage", "UNESCO Heritage", "World Heritage" or any equivalent expression;

e) In registering a cultural asset in the UNESCO "Heritage List", the UNESCO Cultural Heritage Committee is not classifying an asset;

f) The classification of a cultural asset always depends on a prior administrative classification procedure;

g) Neither UNESCO nor the Portuguese State opened an administrative classification procedure regarding the cultural landscape of the "Alto Douro Wine Region", such procedure being mandatory;

h) Even if one considers that the registration of a cultural asset in the "World Heritage List" constitutes, in essence, a classification, such procedure would in any case be invalid, as there was, for example, no prior hearing of the interested parties;

i) And furthermore ineffective, because there was no publication of the decision of the UNESCO World Heritage Committee in the Official Journal;

j) Cultural assets registered in the UNESCO "World Heritage List" would, at most, be classified as properties of National Interest

k) Article 44º, no 1, of the EBF refers to the Classification of National Monument that existed in our legal system until the entry into force of the LBPC;

l) The concept of Ensemble allows that within that same ensemble there may exist properties devoid of cultural value, therefore the interpretation that all properties inserted within an Ensemble or within a cultural landscape are, merely on that basis, classified and, as such, exempt from IMI is abusive;

m) Article 44º, no 1 of the EBF, because it can only be directed at tax properties (article 2º of the CIMI), requires individual classification of the properties, independently of the Heritage Category in which they are inserted;

n) The interpretation conveyed by the Claimant is contrary to the CRP, insofar as it violates the constitutional principles: of tax equality, of tax justice, of contributory capacity, of local autonomy, and of participation in decision-making.

It is necessary to decide.

The subject matter of the principal issue is already treated in the jurisprudence of the CAAD and the Tax Courts, with several decisions that can be referenced here, such as those handed down in proceedings 17/2018-T, 76/2015-T, 356/2017-T, 325/2014-T, 33/2016-T of the CAAD and the judgment of the North Tax Court, of 01.06.2017, handed down in proceeding 00693/14. We will follow closely the CAAD judgment of 05.07.2017, handed down in proceeding 46/2017-T and the judgment of the North Tax Court, of 04.05.2017, handed down in proceeding 01480/14.

In the present case, it has been seen that it is the Claimant's intent to benefit from the IMI exemption provided for in subsection n) of article 44º of the EBF, relating to "properties classified as national monuments and properties individually classified as being of public interest, municipal value or cultural heritage, in accordance with applicable legislation".

The properties in question were not individually classified, so the application of the exemption can only derive from the first part of that provision which refers to "properties classified as national monuments".

The AT argues that this reference relates to properties that were classified as national monuments under the legislation in force before Law no 107/2001, of 8 September, as this established the category of national monument, but not the classification as national monument, in nos 1 and 2 of article 15º.

However, no 5 of article 44º, as amended by Law 3-B/2010, of 28 April, makes reference to "notification of classification as national monuments", manifestly referring to notifications that may occur after its entry into force, so this expression should be interpreted as referring to immovable properties to which the designation of "national monument" is attributed. In truth, this notification was not provided for, in these terms, in the previous version, so it would not be understood that it was referring to notifications relating to monuments classified before the entry into force of Law no 107/2001, more than nine years earlier.

In this context, if the legislator had intended to refer only to monuments classified before Law no 107/2001, it would certainly have made an express reference. In the absence thereof, being reasonable to presume that the legislator knew how to express its intent in appropriate terms (article 9º, no 3, of the Civil Code), it should be concluded that the first part of the aforementioned exemption embraces properties classified as national monuments that were not subject to individual classification.

Moreover, in the same vein, article 53º, no 1, of Law no 107/2001 refers to the "act that decrees the classification of monuments", so it is unequivocal that, under this statute, there is "classification of monuments".

For this reason, the initial part should be interpreted as referring to "properties classified as national monuments" under Law no 107/2001, inclusive.

And, as "national monuments" should be considered all "immovable assets classified as being of national interest, whether they are monuments, ensembles or sites", as article 15º, no 3, of Law no 107/2001 and article 3º of Decree-Law no 309/2009, of 23 October, expressly assign that designation to all of them. That is, they are "properties classified as national monuments", for the purposes of the initial part, the properties to which that designation is assigned.

Since "properties individually classified as being of public interest or municipal interest" are expressly referenced in that subsection n) of no 1 of article 44º of the EBF, the useful scope of the initial reference to "properties classified as national monuments" will consist in extending the exemption to properties that are subject to non-individual classification, namely those integrated in "monuments, ensembles or sites", as referred to in no 3 of article 15º of Law no 107/2001, which assigns to them, precisely, the designation of "national monument", which is used in subsection n) of no 1 of article 44º of the EBF.

"Immovable assets included in the world heritage list integrate, for all purposes and in their respective category, the list of assets classified as being of national interest", by virtue of the provision of no 7 of article 15º of Law no 107/2001.

Thus, from the entry into force of this Law, the inclusion of immovable assets in the world heritage list has as a consequence their classification as being of national interest, henceforth integrating for all purposes the list of assets classified as being of national interest, which amounts to becoming immovable assets classified as being of public interest, without need for any other classification act, and acquiring the designation of "national monuments".

In this context, the opening of a classification procedure which implies the inclusion of an immovable asset in the UNESCO world heritage tentative list, pursuant to no 1 of article 72º of Decree-Law no 309/2009, of 23 October, does not aim to assess whether the conditions for classification are met, nor to issue a final decision by the Government, in accordance with article 30º, no 1, of the same statute (since the classification is already made "for all purposes" by virtue of no 7 of article 15º of Law no 107/2001), but only to identify which immovable assets have been included in that list, namely through a location map, and to establish the respective special protection zone.

It is in this context that, with regard to immovable assets registered in the world heritage list as of the date of entry into force of Decree-Law no 309/2009, provision is made in no 3 of its article 72º only for publication in the form of a notice in the Official Journal of the location plan and implementation of the immovable asset registered in the world heritage list, including the respective protection zone, and not a Government decision in the form of a decree, as provided for in its article 30º, no 1, for final decisions of processes of classification of immovable asset as being of national interest.

Thus, with regard to immovable assets registered in the world heritage list before the entry into force of Decree-Law no 309/2009, there is no place for any classification act, and they integrate "for all purposes and in their respective category, the list of assets classified as being of national interest", by virtue of no 7 of article 15º of Law no 107/2001.

For this reason, regarding these immovable assets registered in the world heritage list, there is no place for the "notification of classification as national monuments (...) to be carried out by the Architectural and Archaeological Heritage Management Institute, I P"[1] that is referred to in no 5 of article 44º of the EBF, as there is no place for classification to notify.

Thus, in these cases, the exemption operates automatically, following publication of the notice provided for in article 72º, no 3, of Decree-Law no 309/2009.

However, the exemption in question covers only "properties classified as national monuments", those that have the designation of "national monument", whether monuments, ensembles or sites, in the terms in which such categories are defined in international law (articles 2º, no 1, and 3º, no 2, of Decree-Law no 309/2009).[2]

Regarding sites, which is the category in which the Alto Douro Wine Region falls in light of international definitions, the IMI exemption covers the properties (whose tax concept is provided by article 2º of the CIMI) situated in the classified area, but not those situated in the special protection zone, as this zone is not classified as a national monument (without prejudice, naturally, to some or several of the properties situated in the protection zone being individually and autonomously classified).

In the case at hand, it is known that the properties are situated in the municipality of ..., indicated in Notice no 15170/2010, published in the Official Journal, II Series, of 30-07-2010, as encompassed in the Alto Douro Wine Region included in the UNESCO World Heritage Tentative List.

According to what can be inferred from the map legend published in Annex I of the aforementioned Notice, in which the "ALTO DOURO WINE REGION Boundary" and "SPECIAL PROTECTION ZONE ALTO DOURO WINE REGION" are distinguished, all the municipalities encompassed will be included in the ensemble formed by the implementation area of the Alto Douro Wine Region and the respective Special Protection Zone.

Regarding the property registered in the rustic land register under article … of the … and regarding the properties registered under rustic articles …º and …º and under urban articles ...º-A, ...º-B and ...º-C, all of the parish of … there is no dispute regarding their classification as a national monument since the Claimant attached with the request for constitution of the Arbitral Tribunal documents proving that, pursuant to no 7 of article 15º of Law no 107/2001 of 08.09.2001, they are classified as national monuments, forming an integral part of the ensemble designated as Alto Douro Wine Region, classified as a national monument: certificates issued, on 21.02.2017, by the Regional Directorate of Culture of the North for the purpose of instructing a process for obtaining tax benefits - IMI exemption (doc. 4 attached with the arbitral request).

This is not the case regarding the other properties: the one registered in the rustic land register under article ... of ..., those registered in the rustic land register under articles ...º, ...º, ...º, ...º of ... and those registered in the rustic land register under articles ...º and ...º of the Union of Parishes of ... and ... . Regarding these, it is not possible to conclude from the documents presented by the Claimant or from others attached to the case whether the properties in question are situated in the implementation zone or in the special protection zone.

However, regarding tax benefits there are special rules from which it follows that the burden of proving the verification of its requirements rests on the taxpayer.

First, article 74º, no 1, of the General Tax Law (LGT) establishes that "the burden of proof of the facts constitutive of the rights of the tax administration or of the taxpayers falls on whoever invokes them", so, being the taxpayer who invokes having the right to enjoy a tax benefit, it will be on the taxpayer that the burden of demonstrating that the respective requirements are met falls.

On the other hand, article 14º, no 2, of the LGT establishes that "holders of tax benefits of any nature are always obliged to reveal or authorize the revelation to the tax administration of the requirements for their granting, or to comply with other obligations provided for in the law or in the instrument of recognition of the benefit, namely those relating to taxes on income, expenditure or assets, or to the rules of the social security system, under penalty of the aforementioned benefits becoming void". From this provision it can be inferred that the burden of proof of the requirements of tax benefits falls on the taxpayers and is realized through the revelation of these requirements or authorization for them to be revealed to the Tax Administration.

Thus, by virtue of the rule on the burden of proof, doubt regarding the location of the properties above referred to in the area defined in the "implementation plan" published in Annex to Notice no 15170/2010, must be assessed procedurally against the Claimant, which amounts to the lack of proof of an essential requirement for the success of its claim.

In this context, the request for arbitral pronouncement must lack merit, as regards the annulment of the assessments and decision refusing the official review request regarding the property registered in the rustic land register under article ... of ..., the properties registered in the rustic land register under articles ...º, ..., ...º, ...º of ... and the properties registered in the rustic land register under articles ...º and ...º of the Union of Parishes of ... and ..., since it was not demonstrated that these properties, regarding which the Claimant seeks to apply the IMI exemption, are classified as "national monuments", namely that they are located in the Alto Douro Wine Region area, and consequently, it was not demonstrated that the assessments and decision refusing the official review, insofar as they refer to these properties, are affected by illegality.

The Respondent further argues that the interpretation conveyed by the Claimant is contrary to the Constitution of the Portuguese Republic (CRP), insofar as it violates the constitutional principles: of tax equality, of tax justice, of contributory capacity, of local autonomy, and of participation in decision-making.

These material unconstitutionality defects seek a concrete examination with official characteristics (cfr. articles 204º and 280º, no 1 of the CRP).[3]

However, what can and must be the subject of concrete examination of constitutionality, by the Courts, are rules and not any decisions, whether of a judicial or administrative nature, nor indeed any possible interpretations that such decisions may make of such rules[4]; (cfr. article 204º of the CRP, Judgment of the South Tax Court - 2nd Section, of 27.04.2006, proceeding no 64561/96; Judgment of the South Tax Court - 2nd Section, of 11.01.2011, proceeding no 4401/10; Judgment of the Tax Court. South -2nd Section, of 05.06.2012, proceeding 5445/12).

However, in this case, the unconstitutionality of any rule, capable of individualizing its application, was not raised, but only that the interpretation given by the Claimant would be unconstitutional, which amounts to arguments advanced by the Respondent to support its position and not "issues" that the tribunal should assess.

However, the unconstitutionality of rules is subject to official examination, as confirmed by the Judgments of the Supreme Administrative Court of 03.02.1993, handed down in resources no 13621, 15287 and 22421 and of 13.12.2000, handed down in resource no 24319. Nevertheless, the tribunal's intervention must be confined to concrete examination of constitutionality, as abstract examination is exclusively incumbent on the Constitutional Court – cfr. article 281º of the CRP.

Now, as we have previously stated, what can and must be the subject of concrete examination of constitutionality, by the Courts, are rules and not any decisions nor indeed any possible interpretations that such decisions may make of such rules.

In any case, we always consider that the Claimant merely verified the provision of the rule of article 44º, no 1, subsection n) of the EBF, which expressly mentions that properties classified as national monuments are exempt from IMI.

The Respondent further argues that the interpretation proposed by the Claimant offends the principle of tax equality, insofar as, while owner of rustic and urban properties integrated in the so-called Alto Douro Wine Region and lacking individual cultural value, it seeks to be privileged, without justifiable reason, compared to other owners of unclassified properties.

The principle of equality determines that equal things be treated equally and different things differently to the extent of the difference.

Now, first of all, a prerequisite for assessing the violation of this constitutional principle is lacking. In truth, it was not proven that the properties of the Claimant lack cultural value. On the contrary, it was proven, through the certificates attached by the Claimant (doc. 4 attached with the arbitral request), that at least the property registered in the rustic land register under article ... of ..., the properties registered under rustic articles ...º and ...º and under urban articles ..., ... and ..., all of the parish of ..., are situated in the Alto Douro Wine Region, included in the UNESCO World Heritage List.

We reiterate that, pursuant to article 15º, no 7 of Law no 107/2001, immovable cultural assets included in the world heritage list integrate, for all purposes and in their respective category, the list of assets classified as being of national interest. Moreover, although the properties are inserted in an ensemble, the fact is that for immovable assets classified as being of national interest, whether they are monuments, ensembles or sites, the designation "national monument" will be adopted.

Accordingly, since the factual prerequisite that the properties in question lack (individual) cultural value is lacking, given that no evidence was produced in that sense, the alleged unconstitutionality necessarily lacks merit, insofar as it would always have to be assessed concretely; it being clear that the aforementioned properties of the Claimant are in equal circumstances in relation to all other properties inserted in the Alto Douro Wine Region.

The Respondent further makes the raising of the claim of unconstitutionality, on the ground that the interpretation given by the Claimant is offensive of the principle of contributory capacity, depend on the fact that the urban property lacks individual cultural value.

The principle of equality before public burdens results from the need to impose patrimonial sacrifices, which concerns all, and should equally affect the spheres of the generality of citizens, with identical contributory capacity. That is, this principle requires that the sacrifices inherent in the satisfaction of public needs be equitably distributed among all citizens; all citizens should contribute equally to public burdens in accordance with their contributory capacity.

Indeed, it is not proven that, concretely, the Claimant, as owner of the properties, is not subject to special rules and impositions because it is inserted in the Alto Douro Wine Region, namely, that it does not bear expenses related to the conservation and restoration of those assets.

In truth, the tax benefit in question entails limiting counterparts that restrict the autonomy of the owners of the properties that benefit from them, who are limited in their action as owners. Articles 45º, 36º and 37º of Law no 107/2001 prohibit owners from carrying out any works or proceeding to their transfer without prior authorization/notification to the Architectural and Archaeological Heritage Management Institute, I. P. (IGESPAR, IP). Which is understandable as it is world heritage.

We reiterate, therefore, that it is clear that the Claimant's properties are in equal circumstances to all other properties inserted in the Alto Douro Wine Region. Therefore, all owners of properties integrated there will benefit, equally, from the tax benefit in question, nor is any disrespect of the principle of contributory capacity apparent, given that it was not demonstrated that the Claimant, concretely, is not subject to financial charges and more burdensome administrative procedures than other owners of properties not inserted in the ensemble.

On the other hand, it was also not determined that the Claimant's faculties of disposition, transformation and enjoyment, concretely with regard to its properties inserted in the classified ensemble, are different from those permitted to the holder of an individually classified property; so it is impossible to assess the alleged subversion of the principle of justice in the distribution of the tax burden.

Finally, there remains the argument most devoid of foundation, concerning the violation of the principle of local autonomy, as it appears that the Respondent sought to defend an interest of the Municipality of ... which it itself abstained from making.

Indeed, as the law indicates (article 44º, no 5 of the EBF), the recognition of the exemption in question is automatic and its notification is the responsibility of the locally competent Municipal Councils.

It is not apparent, therefore, that the interpretation carried out by the Claimant is affected by the invoked unconstitutionality.

For the foregoing, the arbitral request is partially successful, deciding on the illegality of the order refusing the official review request and of the IMI assessments, insofar as they relate to the property registered in the rustic land register under article ... of ... and to the properties registered under rustic articles ... and ... and under urban articles ..., ... and ..., all of the parish of ..., considering that the properties in question are integrated in the Alto Douro Wine Region considered UNESCO World Heritage and, consequently, legally qualified as national monuments, benefiting, for that reason, from the exemption of article 44º, no 1, subsection n) of the EBF.

Since the decision refusing the official review request and the IMI assessments are illegal, insofar as they relate to these properties, the amount of tax paid corresponding to them must be reimbursed to the Claimant, in the amount of € 2,447.60.

B – Indemnification Interest

The Claimant petitions for the Respondent to be condemned to pay indemnification interest, provided for in articles 43º of the General Tax Law and 61º of the Code of Tax Procedure and Process.

It is clear from the case that the partial illegality of the tax assessment acts challenged is directly attributable to the Respondent, which, on its own initiative, committed them, in that part, without legal support, suffering from a misinterpretation (and, therefore, application) of the legal rules to the specific case.

Consequently, the Claimant has the right to receive indemnification interest on the amount of € 2,447.60, in accordance with the provision of articles 43º, no 1, of the LGT and 61º of the CPPT.

IV. DECISION

In these terms, it is decided in this Arbitral Tribunal:

  • Judge the arbitral request partially successful;

  • Declare partially illegal the act refusing the official review request and the IMI assessments nos 2012..., 2013..., 2014... and 2015..., insofar as they relate to the property registered in the rustic land register under article ... of ... and to the properties registered under rustic articles ... and ... and under urban articles..., ... and ..., all of the parish of ..., for violation of law, with the other legal consequences;

  • Condemn the Tax and Customs Authority to reimburse to the Claimant the amount of € 2,447.60, relating to tax paid unduly;

  • Condemn the Respondent to the payment of indemnification interest on the amount of € 2,447.60;

  • Condemn the Respondent for 98% and the Claimant for 2% of the costs of the present proceedings.

V. VALUE OF THE PROCEEDINGS

In accordance with the provision of article 306º, no 2 of the CPC, 97º-A, no 1, subsection a) of the CPPT and 3º, no 2, of the Regulation of Costs in Tax Arbitration Proceedings, the value of the proceedings is fixed at € 2,494.71.

VI. COSTS

Pursuant to article 22º, no 4 of the LRTA, the amount of costs is fixed at € 612.00, in accordance with Table I attached to the Regulation of Costs in Tax Arbitration Proceedings, 98% at the charge of the Respondent and 2% at the charge of the Claimant.

Notify.

Lisbon, 12 February 2019.

The Arbitrator,

(Cristina Aragão Seia)

[1] Currently, the competencies of the Architectural and Archaeological Heritage Management Institute, I. P., are exercised by the General Directorate of Cultural Heritage, pursuant to article 13º, subsection a), of Decree-Law no 115/2012, of 25 May.

[2] These definitions are contained, in particular, in the Convention for the Protection of World Cultural and Natural Heritage, approved for accession, by Decree-Law no 49/79, of 6 June, which provides the following definitions, in its article 1º:

Monuments. - Architectural, sculptural or monumental painting works, elements or structures of an archaeological character, inscriptions, caves and groups of elements with exceptional universal value from the point of view of history, art or science;

Ensembles. - Groups of isolated or grouped constructions which, by virtue of their architecture, unity or integration into the landscape, have exceptional universal value from the point of view of history, art or science;

Sites of interest. - Works of man, or combined works of man and nature, and zones, including sites of archaeological interest, with exceptional universal value from the historical, aesthetic, ethnological or anthropological point of view.

The Convention for the Safeguarding of Architectural Heritage in Europe, approved for ratification, by Resolution of the Assembly of the Republic no 5/91, of 23 January, uses the following definitions:

  1. Monuments: all buildings of particular note for their historical, archaeological, artistic, scientific, social or technical interest, including installations or decorative elements forming an integral part of such buildings;

  2. Architectural ensembles: homogeneous groups of urban or rural constructions of particular note for their historical, archaeological, artistic, scientific, social or technical interest, and sufficiently coherent to be the subject of topographical delineation;

  3. Sites: combined works of man and nature, partially built and constituting spaces sufficiently characteristic and homogeneous to be the subject of topographical delineation, of particular note for their historical, archaeological, artistic, scientific, social or technical interest.

[3] GOMES CANOTILHO, J.J. and MOREIRA, V., Constitution of the Portuguese Republic Annotated, 4th Edition, 2nd Volume, Coimbra: Coimbra Publisher, 2010, pp. 940 et seq.

[4] GOMES CANOTILHO, J.J. and MOREIRA, V., Constitution of the Portuguese Republic Annotated, 4th Edition, 2nd Volume, Coimbra: Coimbra Publisher, 2010, pp. 518 et seq.

Frequently Asked Questions

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What is the IMI tax exemption under Article 44(1)(n) of the Portuguese Tax Benefits Statute (EBF)?
Article 44(1)(n) of the Portuguese Tax Benefits Statute (EBF) provides an IMI exemption for buildings classified as of public interest or buildings located within classified zones, areas, or sites, provided certain conditions are met. This exemption applies to properties within UNESCO World Heritage sites and their special protection zones, such as the Alto Douro Wine Region Cultural Landscape. To benefit from the exemption, taxpayers must demonstrate that their properties fall within the geographical boundaries defined in official notices published in the Diário da República, and that the properties meet the heritage preservation requirements established by law. The exemption aims to encourage preservation of Portugal's cultural heritage by reducing the tax burden on owners of historically significant properties.
Can the unconstitutionality of Article 44(1)(n) EBF affect IMI tax liquidations from 2012 to 2015?
Yes, the unconstitutionality of Article 44(1)(n) EBF can affect IMI tax liquidations from 2012 to 2015. When a Constitutional Court declares a tax provision unconstitutional with retroactive effects, taxpayers can request the annulment of tax assessments based on that provision, even for prior years. In CAAD arbitration, taxpayers can raise unconstitutionality arguments, and if the tribunal finds constitutional doubts, it may refer the matter to the Constitutional Court or apply the unconstitutionality directly if already declared. Successful unconstitutionality claims result in partial or total annulment of IMI assessments, with taxpayers entitled to reimbursement of amounts unduly paid plus compensatory interest (juros indemnizatórios) calculated from the payment date. However, statute of limitations rules apply, generally limiting claims to four years from the payment date under Article 43 of the General Tax Law (LGT).
How can taxpayers challenge IMI tax assessments through CAAD arbitration proceedings in Portugal?
Taxpayers can challenge IMI tax assessments through CAAD arbitration by filing a request for arbitral proceedings under the Legal Regime of Tax Arbitration (RJAT - Decree-Law 10/2011). The process begins by submitting a request through the CAAD online platform, paying the required fee, and clearly identifying the contested assessments and legal grounds. Unlike administrative litigation, CAAD arbitration does not require prior administrative remedies (gracious complaint or hierarchical appeal) for standard IMI assessments, as confirmed in this decision. The tribunal can be singular (one arbitrator) or collective (three arbitrators), depending on the case value and party preferences. After the request is accepted, the Tax Authority files a response, evidence is submitted, and the tribunal issues a binding decision within six months. CAAD arbitration offers advantages including faster resolution, specialized tax expertise, lower costs compared to judicial litigation, and binding enforceability equivalent to court judgments.
What is the procedure for requesting an official review (revisão oficiosa) of IMI tax liquidations?
The procedure for requesting an official review (revisão oficiosa) of IMI liquidations is governed by Articles 78 and 79 of the Portuguese Tax Procedure Code (CPPT). Taxpayers must submit a written request to the tax authority that issued the assessment (typically the Director of Finance), clearly identifying the contested assessments and explaining the legal or factual errors. The request must be filed within four years from the date the tax became payable or definitive under Article 78(1) CPPT. The tax authority has one year to decide on the request, and silence is deemed a tacit refusal. Official review can be based on manifest illegality, factual errors, calculation mistakes, or legal misinterpretation. If granted, the tax authority issues a new assessment or annuls the original one. If refused, taxpayers can subsequently challenge the refusal through CAAD arbitration or judicial appeal, as demonstrated in this case where the claimant proceeded to arbitration after the Director of Finance rejected their official review request dated 06.03.2017.
Are taxpayers entitled to compensatory interest (juros indemnizatórios) when IMI liquidations are partially annulled?
Yes, taxpayers are entitled to compensatory interest (juros indemnizatórios) when IMI liquidations are partially or totally annulled, pursuant to Article 43 of the General Tax Law (LGT). Compensatory interest compensates taxpayers for the financial loss caused by paying tax amounts later determined to be unlawfully charged. The interest accrues from the date of payment of the unduly charged amount until the date of reimbursement, calculated at the legal rate established annually by ministerial order. In CAAD arbitration decisions annulling IMI assessments, tribunals routinely order the Tax Authority to reimburse the unduly paid amounts plus compensatory interest. The right to compensatory interest is automatic and does not require specific proof of damages, as it derives directly from the illegal deprivation of funds. This principle applies regardless of whether the annulment results from legal interpretation errors, constitutional invalidity, factual mistakes, or procedural irregularities. The Tax Authority must process the reimbursement and calculate interest within the statutory timeframe to avoid additional interest accumulation.