CAAD 421/2016-T: IMT and Stamp Tax Exemption for FIIAH Real Estate Investment Funds

ARBITRAL DECISION

I – REPORT

1. On 21 July 2016, the company "A…, S.A.", with registered office at … …, no.…, …-… Lisbon, registered in the Commercial Registry under single registration and tax identification number…, in its capacity as management company of the Real Estate Investment Fund "B… – Closed Real Estate Investment Fund for Residential Leasing", registered with the Securities Market Commission, with tax identification number … (hereinafter referred to as the "Claimant"), submitted to the Administrative Arbitration Centre (CAAD) a request for the constitution of an arbitral tribunal with a view to obtaining an arbitral decision, in accordance with the provisions of articles 2, paragraph 1, subparagraph a), 3, paragraph 1 and 10 of Decree-Law No. 10/2011, of 20 January (hereinafter designated RJAT), following the tax assessment acts for the Municipal Tax on Onerous Property Transfers (IMT) and Stamp Tax (IS), dated 30 May 2016, pursuant to paragraph 16 of article 8 of the Special Regime applicable to Real Estate Investment Funds for Residential Leasing (FIIAH) and Real Estate Investment Companies for Residential Leasing (SIIAH), approved by articles 102 to 104 of Law 64-A/2008, of 31 December, amended by article 235 of Law 83-C, of 31 December, in the amount of € 2,842.59 (two thousand eight hundred and forty-two euros and fifty-nine cents) and € 1,209.40 (one thousand two hundred and nine euros and forty cents), respectively.

2. In the request for an arbitral decision, the Claimant chose not to appoint an arbitrator.

3. In accordance with paragraph 1 of article 6 and subparagraph b) of paragraph 1 of article 11 of the RJAT, as amended by article 228 of Law No. 66-B/2012, of 31 December, the Deontological Council appointed the undersigned as sole arbitrator, who accepted the appointment within the legally prescribed period.

4. The arbitral tribunal was constituted on 19 October 2016.

5. On 28 November 2016, the Respondent, duly notified for that purpose, submitted its reply.

6. The meeting provided for in article 18 of the RJAT was dispensed with by the Parties.

7. The Claimant, in an application submitted on 18 January 2017, stated that it intended to submit written submissions if the Arbitral Tribunal deemed it appropriate. However, despite the Tribunal's decision to allow 10 days for the Claimant and Respondent, in that order, to submit their respective written submissions, this did not occur.

8. The position of the Claimant, expressed in the request for an arbitral decision, is, in summary, as follows:

8.1. The assessment acts which are the subject of the present arbitral decision are vitiated by errors regarding the legal premises, errors regarding factual premises, and violation of law.

8.2. Law No. 64-A/2008, of 31 December, approved the special regime applicable to real estate investment funds for residential leasing (FIIAH) and real estate investment companies for residential leasing.

8.3. In its article 8, tax regime applicable to FIIAHs, more specifically in paragraph 14, added by Law No. 83-C/2013, of 31 December, the meaning of the expression "urban properties intended for leasing for permanent housing" was enshrined for the first time.

8.4. Thus, for purposes of the Tax Regime of FIIAHs, namely with regard to the recognition of the exemptions provided in paragraphs 6 to 8 of article 8, it is considered that urban properties are intended for leasing for permanent housing whenever they are the subject of a lease contract for permanent housing within a period of three years counted from the moment they became part of the fund's assets.

8.5. Indeed, if the properties that form part of the assets of FIIAHs have not been the subject of a lease contract within the period of three years, counted from the date of their entry into the fund's assets, the taxpayer must request from the Tax and Customs Authority (AT) during the thirty days following the end of said period, the assessment of the respective tax. When the properties are transferred by the FIIAH or the FIIAH itself is liquidated, equally before the expiry of the period of three years, counted from the date of entry of the relevant properties into the assets of the FIIAH, the taxpayer must likewise request the assessment of the respective tax.

8.6. Nevertheless, article 236 (transitional provision within the scope of the special regime applicable to FIIAHs and SIAHs) of Law No. 83-C/2013, of 31 December, extended the application of the tax regime of FIIAHs to properties that had been acquired by them before 1 January 2014, with the three-year period being counted from 1 January 2014 in those cases. For this reason, the Claimant requested from the AT the assessment of IMT and IS following the changes introduced to the Tax Regime of FIIAHs.

8.7. However, such assessments of IMT and IS are afflicted by illegality due to violation of the provisions of article 103, paragraph 3 of the Constitution of the Portuguese Republic, since the acquisition of the ownership of the relevant properties by Fund B… was not, in the context of IMT and IS, subject to the verification of any subsequent facts or circumstances, nor subject to any regime of lapse. At the moment when the properties – subject of the Assessments – entered the assets of Fund B…, the IMT and IS exemptions provided for in paragraphs 7, subparagraph a), and 8 of article 8 of the Tax Regime of FIIAHs were definitively crystallized in the tax legal order.

8.8. Therefore, since there were no legally provided facts or circumstances at the moment of recognition of the exemption on which the lapse of the recognized exemption depended, it is manifest that the subsequent imposition of such facts or circumstances to exemptions crystallized in the tax legal order of the Claimant is unconstitutional, due to violation of the principle of non-retroactivity of tax law, enshrined in article 103, paragraph 3, of the Constitution of the Portuguese Republic.

8.9. Furthermore, the Transitional Provision within the scope of the special regime applicable to FIIAHs and SIAHs (article 236 of Law No. 83-C/2013, of 31 December), in extending the application of the current Tax Regime of FIIAHs "to properties that were acquired by FIIAHs before 1 January 2014, with the three-year period provided for in paragraph 14 being counted from 1 January 2014" – is directly and unequivocally violating the principle of non-retroactivity of tax law constitutionally enshrined.

8.10. For all the foregoing, the IMT and IS assessments, relating to the year 2016, must be declared null based on their unconstitutionality, with all legal consequences.

9. The position of the Respondent expressed in its reply is, in brief summary, as follows:

9.1. The Respondent is subject to law and to the law, and its organs and agents must be the first to comply with it. Therefore, it could not/cannot refuse the application of a norm or fail to comply with the law by invoking or questioning its constitutionality, as it is subject to the principle of legality, as established in articles 266, paragraph 2 of the CRP, 3, paragraph 1 of the CPA and 55 of the LGT.

9.2. On the other hand, regarding the property in question, which formed part of the Fund at the date of entry into force of Law No. 83-C/2013, of 31 December, the Claimant requested from the AT the assessments of IMT and Stamp Tax, in light of the changes introduced to the tax regime of FIIAHs, in that, in 2016, it transferred it to third parties, thereby conferring upon it a different destination from what was supposed: residential leasing.

9.3. For this reason, there is no issue of retroactivity of the legal norm of article 8 of the Tax Regime of FIIAHs, as amended by Law No. 83-C/2013, of 31 December, and of article 236, paragraph 2 of the same law, nor is there any violation of its legitimate expectations.

9.4. Since the creation of the tax regime applicable to FIIAHs, by Law No. 64-A/2008, of 31 December, the exemptions in question, both in the context of IMT and in the context of Stamp Tax, required, respectively: (i) that the acquisition of the properties had as exclusive destination "leasing for permanent housing" and (ii) that the transfer had as object "properties intended for permanent housing which occurs as a result of the conversion of the property right over such properties into a leasing right thereon, as well as with the exercise of the purchase option provided for in paragraph 3 of article 5".

9.5. Indeed, taxpayers who wished to benefit from said exemptions always had, from the very beginning of the tax regime applicable to FIIAHs, to comply with the requirement that such properties be intended exclusively for leasing for permanent housing.

9.6. In any case, given the transfer of the property in 2016, it is unequivocal that the Claimant could not, in any way, benefit from the requested exemption.

9.7. Therefore, given the transfer of the property without allocation thereof to residential leasing, this would always determine the lapse of the exemption, pursuant to article 14, paragraph 2 of the EBF.

9.8. Article 8, paragraph 16 of the regime merely served to implement an anti-abuse measure, establishing that properties that do not remain in portfolio with exclusive allocation to residential leasing were not acquired for such purpose. Furthermore, limiting such lapse to a period defined in the law rather than what occurred previously, due to the application of the EBF. Indeed, one cannot conclude that there is a circumstance of retroactivity since the new law did not simply determine, and without more, that properties previously acquired be subject to taxation in the context of IMT and Stamp Tax.

9.9. On these grounds, the Respondent concludes that the request for an arbitral decision is entirely unfounded, and the legality of the act which is the subject of these proceedings is evident.

II – QUESTION TO BE DECIDED

10. In light of the foregoing, the main question to be decided is as follows:

− Are the tax assessment acts for the Municipal Tax on Onerous Property Transfers and Stamp Tax, relating to the year 2016, effected under article 8 of the Tax Regime of FIIAHs, as amended by Law No. 83-C/2013, of 31 December, and article 236, paragraph 2 of the same Law, in the total amount of € 4,051.99 (four thousand and fifty-one euros and ninety-nine cents), issued by the Tax and Customs Authority, illegal.

III – PRELIMINARY EXAMINATION

11. The Tribunal is regularly constituted and is materially competent, in accordance with articles 2, paragraph 1, subparagraph a), 5, paragraph 2, and 6, paragraph 1, of the RJAT.

The request for an arbitral decision is timely, in accordance with paragraph 1 of article 10 of the RJAT.

The parties have legal personality and capacity, are parties with standing and are legally represented, in accordance with articles 4 and 10, paragraph 2, of the RJAT and article 1 of Order No. 112-A/2011, of 22 March.

Taking into account the assessment of the same circumstances of fact and the interpretation and application of the same principles and rules of law, the joinder of claims is admissible, in accordance with article 3, paragraph 1 of the RJAT.

The proceedings do not have defects that would render them void.

All things considered, a decision must be rendered.

IV – FACTUAL FINDINGS

12. Taking into account the tax administrative proceedings and the documentary evidence attached to the case, the factual matter relevant to the understanding of the decision must now be presented and is established as follows:

- The Claimant constituted B… – Closed Real Estate Investment Fund for Residential Leasing (as alleged by the Respondent and not contradicted by the Claimant).

- On 18.12.2013, the "B… – Closed Real Estate Investment Fund for Residential Leasing" acquired the urban property registered in the respective property register under article …, unit "C", and benefited from the exemption from IMT and Stamp Tax under the provisions of subparagraph a) of paragraph 7 and paragraph 8 of article 8 of the legal regime of FIIAHs (as alleged by the Respondent and not contradicted by the Claimant and document No. 1 attached to the Arbitral Petition).

- On 30.05.2016, IMT assessment notes No.… in the amount of € 2,842.59 (two thousand eight hundred and forty-two euros and fifty-nine cents) and Stamp Tax No.…, in the amount of € 1,209.40 (one thousand two hundred and nine euros and forty cents) were issued (as per Document No. 1 attached to the Arbitral Petition).

- According to the description of the tax fact of the aforementioned assessments, it states:

"On 25 May 2016, IMT assessment was requested, pursuant to article 8, paragraph 16 of the special regime applicable to real estate investment funds for residential leasing (SIIAH) by B… – Closed Real Estate Investment Fund for Residential Leasing, NIF –…, with reference to the purchase made on 18.12.2013, at the Notary Office in charge of C…, from D…, NIF…, for the sum of € 151,175.00, with exemption under article 8, paragraph 7 of the said regime, of unit C of article no.…, with the property value of € 111,430.00, intended for housing, located at Rua … No. … …, registered in the urban property register of the parish of …, municipality of Cascais." (as per Document No. 1 attached to the Arbitral Petition).

- On 24.05.2016, the property identified in B) was transferred by the Fund (as alleged by the Respondent and not contradicted by the Claimant).

- On 31.05.2016, the Fund made payment of the total sum of € 4,051.99 (four thousand and fifty-one euros and ninety-nine cents) as IMT and Stamp Tax assessment (as per Document No. 2 attached to the Arbitral Petition).

13. The facts stated in the preceding paragraph constitute uncontested matters and are documented in the case.

14. There are no facts deemed unproven, since all facts relevant to the assessment of the claim have been deemed proven.

V – LEGAL GROUNDS

15. We shall now determine the applicable law to the underlying facts, in accordance with the question already stated (see, above, paragraph 10).

16. In order to appropriately respond to the question posed to us, we consider it pertinent to first address the special regime applicable to real estate investment funds for residential leasing (FIIAH) and real estate investment companies for residential leasing (SIIAH) approved through article 102 of Law No. 64-A/2008, of 31.12 (State Budget Law 2009), with the objective of, following the economic crisis triggered in 2008, assisting various entities with difficulties in meeting commitments assumed with financial and credit institutions.

17. Thus, and following this sequence, the special regime of FIIAHs was introduced into the Portuguese legal order, and article 104 of the State Budget Law for 2009 (LOE 2009) provided as follows:

"1 - The constitution and functioning of FIIAHs, as well as the marketing of their participation units, are governed by the provisions of the Legal Regime of Real Estate Investment Funds, approved by Decree-Law No. 60/2002, of 20 March, amended by Decree-Laws Nos. 252/2003, of 17 October, 13/2005, of 7 January, and 357-A/2007, of 31 October, and subsidiarily, by the provisions of the Securities Code, approved by Decree-Law No. 486/99, of 13 November, amended by Decree-Laws Nos. 61/2002, of 20 March, 38/2003, of 8 March, 107/2003, of 4 June, 183/2003, of 19 August, 66/2004, of 24 March, 52/2006, of 15 March, 219/2006, of 2 November, and 357-A/2007, of 31 October, with the specificities contained in the following articles" (bold and underlined by us)

18. Indeed, from the array of specificities provided in the regime, only those which are of interest for these proceedings should be highlighted, which are enshrined in paragraphs 7 and 8 of article 8 of the regime, and according to which:

"7 - The following are exempt from IMT:

a) The acquisition of urban properties or autonomous units of urban properties intended exclusively for leasing for permanent housing, by the investment funds referred to in paragraph 1;

b) The acquisition of urban properties or autonomous units of urban properties intended for owner-occupied permanent housing, as a result of the exercise of the purchase option referred to in paragraph 3 of article 5 by the lessees of properties that form part of the assets of the investment funds referred to in paragraph 1.

8 - The following are exempt from stamp tax all acts performed, provided they are connected with the transfer of urban properties intended for permanent housing which occurs as a result of the conversion of the property right over such properties into a leasing right thereon, as well as with the exercise of the purchase option provided for in paragraph 3 of article 5".

19. However, and in accordance with the legislative developments regarding the exemptions that FIIAHs and SIAHs could benefit from, Law No. 83-C/2013, of 31.12, in its article 235 proceeds to add paragraphs 14 to 16 to article 8, which now provide that:

"14 - For purposes of the provisions of paragraphs 6 to 8, it is considered that urban properties are intended for leasing for permanent housing whenever they are the subject of a lease contract for permanent housing within a period of three years counted from the moment they became part of the fund's assets, the taxpayer being required to communicate and provide proof to the AT of the respective actual leasing within 30 days following the end of said period.

15 - When the properties have not been the subject of a lease contract within the three-year period provided for in the preceding paragraph, the exemptions provided for in paragraphs 6 to 8 shall lapse, in which case the taxpayer must request from the AT, within 30 days following the end of said period, the assessment of the respective tax.

16 - If the properties are transferred, with the exception of the cases provided for in article 5, or if the FIIAH is subject to liquidation, before the expiry of the period provided for in paragraph 14, the taxpayer must likewise request from the AT, before the transfer of the property or the liquidation of the FIIAH, the assessment of the tax due in accordance with the preceding paragraph."

20. These additions, subordinated to and dependent on the transitional provision provided for in article 236 of Law No. 83-C/2013, of 31.12, within the scope of the special regime applicable to FIIAHs and SIAHs, which provided that:

"1 - The provisions of paragraphs 14 to 16 of article 8 of the special regime applicable to FIIAHs and SIAHs, approved by articles 102 to 104 of Law No. 64-A/2008, of 31 December, apply to properties acquired by FIIAHs from 1 January 2014 onwards.

2 - Without prejudice to the provision in the preceding paragraph, the provisions of paragraphs 14 to 16 of article 8 of the special regime applicable to FIIAHs and SIAHs, approved by articles 102 to 104 of Law No. 64-A/2008, of 31 December, also apply to properties acquired by FIIAHs before 1 January 2014, with the three-year period provided for in paragraph 14 being counted from 1 January 2014 in those cases."

21. Having now established this chronology and the historical development of the special regime of FIIAHs, we shall proceed to the interpretation of the norms in question, relying on the general principles that guide this task, in accordance with the provisions of article 9 of the Civil Code (CC) applicable by virtue of article 11 of the General Tax Law (LGT), according to which the interpretation of tax law must be carried out in accordance with general principles of interpretation.

22. Thus, in compliance with the general rules of interpretation, we can verify that the IMT and Stamp Tax exemptions provided for in paragraphs 7 and 8 of article 8 of the legal regime of FIIAHs and SIAHs take place only when the following requirements are met:

Regarding IMT:

a) The acquisition of urban properties or autonomous units of urban properties by the investment funds referred to in paragraph 1 of article 8 of the Regime;

b) intended exclusively for leasing for permanent housing,

And/or

a) The acquisition of urban properties or autonomous units of urban properties;

b) intended for owner-occupied permanent housing;

c) as a result of the exercise of the purchase option of the property by the lessees of the properties that form part of the assets of the investment funds, exercisable until 31 December 2020.

Indeed, and to what concerns us here, subparagraph a) of paragraph 7 of article 8 of the special regime requires that the property in question be intended for leasing for permanent housing in order to benefit from the provision therein.

Regarding the Stamp Tax exemption:

a) All acts performed by FIIAHs;

b) Connected with the transfer of urban properties intended for permanent housing that:

i) Occur as a result of the conversion of the property right over such properties into a leasing right thereon;

ii) Or, occur as a result of the exercise of the purchase option by the lessee until 31.12.2020.

23. This means that the Claimant, as a FIIAH, is entitled to the fiscal benefit in question – exemption from IMT and Stamp Tax – provided it complies with the legal conditions established for its grant.

24. That is, the exemption from IMT and Stamp Tax in question is influenced by and dependent on the facts and circumstances vis-à-vis which it is granted, resulting from the provision and legal establishment of article 8, paragraphs 7 and 8 of the Regime of FIIAHs.

25. However, and given that it is a fiscal benefit, it is necessary to bring to bear the provision of paragraph 2 of article 14 of the General Tax Law (LGT) according to which:

"The holders of fiscal benefits of any nature are always obliged to disclose or authorize the disclosure to the tax administration of the premises of their grant, 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 property, or to the provisions of the social security system, under the penalty of such benefits being rendered without effect."

26. Indeed, and in accordance with this legal provision, also applicable to the legal regime of FIIAHs here in question, the fiscal benefit provided for in paragraphs 7 and 8 of article 8 of the special regime of FIIAHs – exemption from IMT and Stamp Tax – in order to be applicable as of the date of its grant, required that the interested party, here the Claimant, disclose to the Tax Authority the premises of its grant, as far as the exemption from IMT and IS is concerned, namely, and here specifically, that:

Regarding IMT:

a) The acquisition of the unit designated by the letter "C" of the urban property registered in the respective property register under article … of the parish of…, municipality of Cascais was intended exclusively for leasing for permanent housing.

It should be noted that the obligation to allocate the unit in question to residential leasing is not a requirement that was added or introduced by the amendments made by the State Budget Law for 2014 (State Budget Law 2014), it is in fact "a requirement of the FIIAH tax regime ab initio, moreover a natural consequence of the motivations that led to the creation of these funds. The State Budget Law for 2014 certainly came to establish a new requirement for the exemption: if the allocation to leasing for permanent housing does not occur within the period of 3 years following the entry of the property into the fund, the fund must request the assessment of the IMT that was not assessed ab initio. (...) it is not sufficient to have a declared intention at the time of acquisition of the property, but an actual allocation to leasing for permanent housing." (Decision of the CAAD rendered in Proc. No. 398/2015-T).

Regarding the Stamp Tax exemption

The transfer of urban properties intended for permanent housing occurred as a result of the conversion of the property right over such properties into a leasing right thereon, or the exercise of the purchase option by the lessee until 31.12.2020.

27. Now, it appears from B) of the facts deemed proven that "On 18.12.2013, B… – Closed Real Estate Investment Fund for Residential Leasing" acquired the urban property registered in the respective property register under article…, unit "C", and benefited from the exemption from IMT and Stamp Tax under the provisions of subparagraph a) of paragraph 7 and paragraph 8 of article 8 of the legal regime of FIIAHs.", which means that (apparently) the Claimant, on 18.12.2013, met the necessary and sufficient requirements for the exemption from IMT and IS provided for in the special regime to be recognized.

28. Following this sequence and returning to subparagraph a) of paragraph 7 of article 8 of the Special Regime, it is important to note, agreeing with certain arbitral decisions which are transcribed here, that "with respect to the same normative framework, when the norm – i.e., subparagraph a) of paragraph 7 of article 8 of the Special Regime – already presupposed that the property be intended for leasing for permanent housing in order to benefit from such exemption. Therefore, we also agree that "the obligation to allocate the property to residential leasing is not a requirement of the amendments introduced by the State Budget Law for 2014, but rather a requirement of the FIIAH tax regime ab initio, moreover a natural consequence of the motivations that led to the creation of these funds" (Decision of the CAAD in Proc. No. 710/2015-T).

29. The truth is that the conditions, as already mentioned, were present ab initio in the regime – See paragraph 8 of article 8 of the special regime - not having undergone any modification with the amendments introduced by the State Budget Law 2014, contrary to what is argued by the Claimant, when it mentions that: "the IMT and IS exemptions were not, at the date the properties entered the assets of Fund B…, subject to the verification of any subsequent facts or circumstances, nor subject to any regime of lapse."

30. As stated further in the CAAD Decision referenced above [Proc. 710/2015-T], regarding this matter "the fiscal benefit in question is not of a subjective or contractual nature, and was dependent on a condition – allocation to residential leasing. Moreover, fiscal benefits are not, as is well known and as a general rule, permanent and even less immutable. Moreover, there are several ways to extinguish them, such as their express revocation, the suppression of the tax to which the benefit relates, or the passage of normative periods provided for the validity of 'beneficial' norms with the consequent lapse of the benefits. The Tax Benefits Statute itself enshrines, currently, a general regime for the extinction of fiscal benefits provided for in its article 14 and which includes, namely, express reference to cases of fiscal benefits relating to the acquisition of goods intended for the direct realization of the purposes of the acquirers (see paragraph 3). It transpires that none of this happened in this case with the entry into force of the State Budget Law for 2014, since it was sufficient to introduce a clarifying element of the concept of 'allocation to leasing for permanent housing'. On this point, it is even difficult to understand why the reference to "allocation to leasing" did not contain, in the initial regime (i.e., in the wording of the State Budget Law for 2009), any clarification. What type of allocation did the tax law intend (e.g., merely accounting)?"

31. Continuing, the aforementioned decision, alluding to facts in all respects similar to those in the present case, that: "That said, it is difficult to show that a violation of legitimate expectations exists on the part of the Claimant, nor even in respect of the prohibition of retroactive tax law. On this point, note that the position of the Claimant, before and after the entry into force of the State Budget Law for 2014, was in no way altered, despite the special regime and the transitional provision coming to indicate a period of holding and imposing actual leasing (i.e., celebration of a contract). Indeed, it was only the transfer of the unit by the Claimant – subsequent to the entry into force of the State Budget Law for 2014 – that triggered the taxation under the provision (already) in effect at the time of the transfer. This aspect invokes the traditional position of the Constitutional Court of prevalence, as the tax generating fact, of the moment of transfer of the goods and not the moment of their acquisition – see, for all, Constitutional Court Decision No. 85/2010, rendered on 3 March 2010, and our annotation thereto.]".

32. Indeed, and returning to the facts deemed proven in the present case, we find that the Claimant acquired, on 18.12.2013, the unit designated by the letter "C" of the urban property registered in the respective property register under article…, of the parish of…, which it transferred on 24.05.2016.

33. From these facts, it follows that the property in question was transferred without it having properly fulfilled its purpose – allocation to permanent residential leasing. This is not a matter of timing, but solely a factual matter.

34. As stated in the decision rendered in Proc. No. 398/2015-T of the CAAD, which we reiterate here: "for compliance with subparagraph a) of paragraph 7 of article 8, it is not sufficient to have a declared intention at the time of acquisition of the property, but an actual allocation to leasing for permanent housing."

35. Thus, the Claimant not proving this requirement, and taking into account that the assessment acts in question concern a property that was transferred by the Claimant in the year 2016, in light of the legal regime of FIIAHs approved by article 102 of Law No. 64-A/2008, of 31.12. (State Budget Law 2009), or the amendments perpetuated by article 235 of Law No. 83-C/2013, of 31.12 (State Budget Law 2014), the exemption from IMT and IS granted ab initio to the Claimant ended up having no basis in law,

36. … by virtue of its failure to demonstrate to the Tax Authority, as it was required to do, in light of the provision of paragraph 2 of article 14 of the LGT, that there was actual allocation of the property to leasing for permanent housing.

37. The same applies to the exemption from IMT, in that the Claimant likewise failed to demonstrate that the transfer of the property in 2016 occurred as a result of the conversion of the property right into a leasing right or that the purchase option was exercised by the lessee.

38. Moreover, and already regarding the eventual temporal question, it appears from the proven facts that the IMT and IS assessments in dispute were not based on the maintenance of the property with the Claimant for a period equal to or greater than three years without allocation to permanent residential leasing.

39. In fact, the property was in the ownership of the Claimant for 2 years and 5 months.

40. Thus, and as explained by Nuno de Oliveira Garcia in Proc. No. 710/2015-T of the CAAD "The fiscal benefit in question did not become extinct, nor did it lapse; it was merely regulated, with an express holding period being introduced and the condition of actual leasing being clarified, which cannot even be considered disproportionate since we believe that for compliance with the special regime in question – even in the initial version of subparagraph a) of paragraph 7 of article 8 of the State Budget Law for 2009 – a mere declared intention at the time of acquisition of the property should not suffice, being necessary an actual allocation to permanent housing leasing. This – the actual allocation to permanent housing leasing – is the premise of the benefit, therefore, and in accordance with article 12 of the Tax Benefits Statute, one cannot even assert that the right to the benefit has been constituted by the Claimant, contrary to what it invokes in its initial request, (...) This understanding is reinforced by the use of the word "exclusively" in the wording of subparagraph a) of paragraph 7 of article 8 of the Special Regime."

41. Indeed, taking into account the facts deemed proven, we are of the opinion that the assessments in question do not invoke the "retroactivity test", but solely and exclusively the fact that the unit in question was transferred, it not being known, because not alleged, and consequently not proven, whether it fulfilled its purpose – allocation to permanent residential leasing.

42. Given the foregoing, taking into account that the IMT and Stamp Tax assessment acts subject to scrutiny in the present case were effected under the provisions of subparagraph a) of paragraph 7 and paragraph 8 of article 8 of the special regime – tax – of FIIAHs, whose wording has remained unchanged since its approval, maintaining its premises as of the date of acquisition of the properties by the Fund, it is the understanding of the Arbitral Tribunal that the assessment acts in question are legal, by virtue of the fact that the property has not been given the destination [leasing for permanent housing] required by law, and due to its subsequent transfer.

43. Continuing, in the direction of analyzing the issue raised by the Claimant regarding the retroactivity or not of the norms introduced by article 236 of Law No. 83-C/2013, of 31 December, under the heading "Transitional Provision within the scope of the special regime applicable to FIIAHs and SIIAHs"

44. Now, the State Budget Law 2014, as we have already mentioned, added to article 8 paragraphs 14 to 16, in the terms which we restate here:

"14 - For purposes of the provisions of paragraphs 6 to 8, it is considered that urban properties are intended for leasing for permanent housing whenever they are the subject of a lease contract for permanent housing within a period of three years counted from the moment they became part of the fund's assets, the taxpayer being required to communicate and provide proof to the AT of the respective actual leasing within 30 days following the end of said period.

15 - When the properties have not been the subject of a lease contract within the three-year period provided for in the preceding paragraph, the exemptions provided for in paragraphs 6 to 8 shall lapse, in which case the taxpayer must request from the AT, within 30 days following the end of said period, the assessment of the respective tax.

16 - If the properties are transferred, with the exception of the cases provided for in article 5, or if the FIIAH is subject to liquidation, before the expiry of the period provided for in paragraph 14, the taxpayer must likewise request from the AT, before the transfer of the property or the liquidation of the FIIAH, the assessment of the tax due in accordance with the preceding paragraph."

45. Indeed, from the reading of these legal provisions it appears that none of the situations specifically provided for therein (or at least, no facts to that effect were alleged), applies to the case in question, in that, referring the transitional provision provided for in article 236 of the State Budget Law 2014 to the provisions of paragraphs 14 to 16 of article 8, whose application is inapplicable to the present situation, the discussion of the retroactivity of the provision in question has no place within the scope of this proceeding.

46. In light of all the foregoing, it is the understanding of this Tribunal that the claim of the Claimant is devoid of foundation.

VI – DECISION

For the factual and legal grounds set out, it is hereby decided that the claim for a declaration of illegality of the IMT and Stamp Tax assessment acts Nos. … and …, respectively, in the total amount of € 4,051.99 (four thousand and fifty-one euros and ninety-nine cents), is unfounded, and such acts shall remain in the legal order.

The value of the case is fixed at € 4,051.99, in accordance with article 97-A, paragraph 1, a), of the Code of Tax Procedure and Process, applicable by virtue of subparagraphs a) and b) of paragraph 1 of article 29 of the RJAT and paragraph 2 of article 3 of the Regulation of Costs in Tax Arbitration Proceedings.

The amount of costs is fixed at € 612.00, in accordance with Table I of the Regulation of Costs in Tax Arbitration Proceedings, to be paid by the Claimant, since the claim was entirely unfounded, in accordance with articles 12, paragraph 2, and 22, paragraph 4, both of the RJAT, and article 4, paragraph 4, of the cited Regulation.

Let notice be given.

Lisbon, 16 June 2017.

The Arbitrator

(Jorge Carita)