Process: 422/2015-T

Date: November 25, 2015

Tax Type: IMT

Source: Original CAAD Decision

Summary

This CAAD arbitration case (Process 422/2015-T) concerns the validity of an ex officio IMT assessment on the acquisition of two autonomous fractions of a tourist undertaking. The claimant company acquired the properties on July 4, 2012, for €305,120, relying on an IMT exemption granted by the Loures Finance Service at zero rate on June 29, 2012, under Article 20 of Decree-Law 423/83. This provision exempts qualified tourism undertakings to facilitate their installation process. The properties were part of a tourist development with recognized 'tourist utility' status valid for 36 months from April 8, 2010. However, in November 2014, the Tax Authority retroactively assessed IMT totaling €21,552 (including interest), effectively revoking the previously granted exemption. The claimant challenged this assessment through a gracious complaint (denied April 9, 2015) and subsequently filed for tax arbitration in July 2015. The claimant's arguments centered on: (1) the properties' qualification for IMT exemption as part of a qualified tourism undertaking; (2) violation of legitimate expectations and legal certainty, since the Finance Service initially validated the exemption; (3) lack of published AT guidelines on the matter, violating Article 68-A of the General Tax Law; (4) improper revocation of the administrative act granting exemption beyond the one-year period established in Articles 136 and 141 of the Administrative Procedure Code; and (5) violation of the principle of good faith. The case raises important issues regarding the temporal scope of IMT exemptions for tourism properties, the binding nature of initial tax assessments at zero rate, and the limits of the Tax Authority's power to retroactively revoke previously granted tax benefits.

Full Decision

ARBITRAL DECISION

CAAD: Tax Arbitration

Process No. 422/2015-T

Subject Matter: IMT, IMT exemption, qualified undertakings of tourist utility, No. 1 of article 20 of Decree-Law 423/83, of 5 December

PARTIES

Claimant – A…, LDA. NIPC PT …, with address at Rua …, n.º …, … Lisbon.

Respondent – TAX AND CUSTOMS AUTHORITY (AT).

I. REPORT

a) On 08-07-2015, the Claimant filed with CAAD a request seeking, under the Legal Framework for Arbitration in Tax Matters (RJAT), the constitution of a singular arbitral tribunal (TAS).

b) The request is signed by a lawyer representing the Claimant.

THE REQUEST

c) The Claimant seeks the annulment of ex officio assessments of IMT (tax collection and interest) relating to the onerous transfer of autonomous fractions designated by the letters "…" and "…" (integrated in the Tourist Undertaking designated "B…") of the urban property located in …, parish and municipality of ..., registered in the property register under articles … and … parish of ..., effected by public deed of 04.07.2012, at the price of 305,120.00 euros, which was notified to it by official letter no. … of 12.11.2014, in the amount of 19,832.80 euros, plus compensatory interest in the amount of 1,719.20 euros, totalling 21,552.00 euros.

d) The request for arbitral pronouncement was preceded by a gracious complaint presented against the assessments on 26.02.2015, which was subsequently dismissed by AT as notified to the Claimant on 09.04.2015.

e) Alleging that the Finance Service of Loures issued the DUC at zero rate of IMT (exemption) on 29.06.2012, by means of a declaration of IMT assessment (also submitted on 29.06.2012), it asserts the non-conformity of the assessments with the law, invoking essentially: 1 – illegality since the properties are intended for the installation of a tourist undertaking; violation of legitimate expectations and guarantees previously established with the issuance of the DUC at zero rate (IMT exemption); violation of the principle of trust and legal certainty inherent in the Rule of Law; violation of the principle of tax legality and violation of the prohibition of retroactivity of tax law and certainty and legal security – article 12 of the General Tax Law and article 103-3 of the Constitutional Law.

OF THE SINGULAR ARBITRAL TRIBUNAL (TAS)

f) The request for constitution of the TAS was accepted by the President of CAAD and automatically notified to AT on 16-07-2015.

g) By the CAAD Deontological Council, the signatory of this decision was appointed as arbitrator, and the parties were notified thereof on 28-08-2015. The parties did not manifest any intention to refuse the appointment, in accordance with the combined provisions of article 11, No. 1, subsections a) and b) of RJAT and articles 6 and 7 of the Deontological Code.

h) Therefore, the Singular Arbitral Tribunal (TAS) has been regularly constituted as of 14-09-2015 to examine and decide on the subject matter of this dispute (articles 2, No. 1, subsection a) and 30, No. 1, of RJAT).

i) All these acts are documented in the communication of constitution of the Singular Arbitral Tribunal dated 14-09-2015, which is hereby reproduced.

j) On 14-09-2015, AT was notified in accordance with article 17-1 of RJAT. It responded on 19.10.2015 enclosing the PA, composed of 6 computer files.

k) Both parties waived the holding of the meeting of parties referred to in article 18 of RJAT: AT requested its waiver and the Claimant, notified to manifest its position regarding the respondent's submission, gave its consent. However, the TAS, in view of the content of AT's response, deemed it prudent to fix, by order of 19.10.2015, a deadline of 10 days for the submission of written arguments and successive submissions.

l) Both the Claimant and the Respondent chose not to submit formal arguments, but reiterated the positions already defended, respectively, in the request for pronouncement and in the response.

PROCEDURAL REQUIREMENTS

m) Legitimacy, capacity and representation – The parties enjoy legal personality, judicial capacity, are legitimate and are represented (articles 4 and 10, No. 2, of RJAT and article 1 of Ordinance No. 112-A/2011, of 22 March).

n) Adversarial principle – AT was notified in accordance with paragraph j) above. All procedural documents and all documents attached to the process were made available to the respective counterparty in the CAAD Case Management System.

o) Dilatory exceptions – The arbitral procedure is not affected by nullities and the request for arbitral pronouncement is timely since it was submitted within the prescribed period in subsection a) of No. 1 of article 10 of RJAT. Indeed,

The Claimant was notified of the decision denying the gracious complaint by official letter … of 07-04-2015, received on 09.04.2015. AT did not challenge this date. The present request was filed with CAAD on 08.07.2015. There being no other element in the process that permits concluding that the filing of the request for pronouncement with CAAD on the stated date was untimely, the TAS considers this procedural requirement to be satisfied.

SUMMARY OF THE CLAIMANT'S POSITION

p) The Claimant argues that the acquisition of the two autonomous fractions of the real property indicated above benefits from the IMT exemption contained in article 20 of Decree-Law 423/83, of 05.12, alleging that it constitutes an interrupting fact of taxation "aimed at facilitating the realisation of the process of installation of undertakings of public utility" and it was on this presupposition of operation of the exempting norm that it acquired them.

q) Adding that the Finance Service of Loures-… "confirmed and validated the application of the IMT exemption", and that the document of assessment at zero rate was presented to the Notary who also validated the application of the IMT exemption.

r) It reiterates that the acquisition "was effected with a view to the installation of the tourist undertaking integrated by the autonomous fractions intended for tourist exploitation".

s) Since the "tourist utility" of the undertaking was recognised for a period of 36 months, counted from 8 April 2010, date of publication of order no. …/2010 of the Office of the Secretary of State for Tourism of ……..2010, published in the Official Gazette, 2nd Series, no. …, of … of … of 2010, the acquisition of the autonomous fractions was carried out during the temporal validity period of "tourist utility", concluding that for this reason "it was intended to permit the continuity of the process of installation of the undertaking".

t) It considers that AT induced it into error "when it granted the exemption from payment of IMT prior to the execution of the public deed in question" and now proceeds to assess the tax.

u) It further alleges the non-existence of general guidelines from AT on the matter and that by virtue of No. 4 of article 68-A of the General Tax Law, their publication was required, bearing in mind that the grounds invoked for the issuance of the assessment are drawn from a jurisprudence-unifying judgment, which it considers to be an essential formality relating to the formation of administrative will.

v) And that this omission could have permitted the Claimant to self-assess the tax now in question, which it considers to constitute a violation of the principle of collaboration between administration and the administered.

w) It argues that, due to the non-existence of a published understanding by AT on this matter, there is a violation of the principle of good faith action (No. 2 of article 226 of the Constitutional Law).

x) It considers that the notification of the conclusions of the Tax Inspection Report, by official letter of 12.11.2011, revoked the "administrative act granting IMT exemption" and that this revocation of the fiscal benefit was made beyond the period of 1 year (articles 136 and 141 of the Administrative Procedure Code).

y) Asserting, therefore, the illegality of the revocation of the IMT exemption, since this revocatory act occurred more than one year after the granting of the exemption.

z) It concludes by requesting the annulment or declaration of nullity of the IMT assessment with the legal consequences thereof.

SUMMARY OF THE RESPONDENT'S POSITION

aa) The Respondent contends that, from the "contract for the assignment of tourist exploitation and management of real property" attached as an annex to the request for pronouncement, as was considered in the final report of the tax inspection, at the date of acquisition of the fractions of the tourist undertaking, the latter was already installed and in the operational phase.

bb) Disagreeing with the reading that the Claimant makes of the scope of application of the IMT exempting norm, it invokes in support of its point of view, a decision of the Supreme Administrative Court (of 23.01.2013 – process 0968/12) where it is concluded, as to the date of acquisition, that "… it is irrelevant whether it occurred before or after the undertaking was already installed and in operation", what is relevant, rather, for the purposes of the said exemption, is whether the acquisition of the fraction was intended for the installation of a tourist undertaking or, rather, for its exploitation.

cc) Since the issue here is to determine the meaning and scope of the norm contained in article 20, No. 1 of Decree-Law No. 423/83, of 05/12, regarding the phrase "acquisitions of properties or autonomous fractions intended for the installation of undertakings qualified as of tourist utility", it concludes that the legislator only intended to cover with this norm acquisitions intended for the "installation" of undertakings, as clearly results from the literal element.

dd) And it argues in defence of this understanding, once more, the text of the Supreme Administrative Court judgment of 23.01.2013 handed down in the process indicated above, regarding the definition of the expression "installation" (by contrast with "operation" and "exploitation") which is intended to mean "the operations and procedures aimed at the construction/creation of tourist undertakings".

ee) And that, even if this were not the case – again citing the text of the Supreme Administrative Court judgment indicated above – "eventual sales of accommodation units carried out even during the construction/installation phase of the undertaking already form part of its exploitation".

ff) It contests the allegation of the Claimant that the granting of the exemption was fundamental to the decision to acquire the fraction, contending that it was incumbent upon it to request that AT, under article 68 of the General Tax Law (LGT), give a previous and binding pronouncement.

gg) Concluding that "not having done so in the manner legally admissible, it cannot now invoke the understanding that AT had to issue a general guideline regarding the disputed question, alleging that this supposed omission vitiates the act of assessment".

hh) It further disagrees with the invoked violation of the principles of security and legal certainty or the existence of grave injustice, either because recourse could be had to the prior request for binding information before the deed of acquisition of the goods, or because the fact that the notary and the property register conservator did not raise objections to the performance of the acts of their responsibility due to non-assessment of IMT does not invest the Claimant in a right or in a legitimate expectation susceptible of founding the right to indemnification.

ii) Regarding the invoked illegality of revocation of a fiscal benefit already granted and consolidated in the legal order, it sustains the automatic character of this benefit, such that its attribution cannot constitute an administrative act, and therefore its cessation could never operate by express or tacit administrative act.

jj) It clarifies, citing part of an arbitral decision of CAAD, process 104/2014-T, that the right to assess IMT is "original" in accordance with article 35-1 of the IMT Code and articles 45-1 and 4 of the General Tax Law (within the period of 8 years counted from the occurrence of the tax event).

kk) It concludes by stating that "the intervention, whether of the Notary, or of the Conservator, as public entities which in the exercise of their function interpret and apply the law, does not confer on the Claimant any legitimate legally protected expectation regarding the interpretation they might make concerning the juridical-tax framework of the acquisition in question", downplaying the fact that the deed and property registration were carried out without the assessment of IMT, because these "entities only intervene in the exercise of a merely supervisory function of compliance with tax obligations, in accordance with what is provided in article 54 of the IMT Code".

II - QUESTIONS WHICH THE TRIBUNAL MUST RESOLVE

• As to the substantive issue – the delimitation of the scope of application of the exempting norm contained in No. 1 of article 20 of Decree-Law No. 423/83, of 5 December.

The TAS is bound by "constituted law" in accordance with No. 2 of article 2 of RJAT.

The substantive question brought to discussion in this process – which is summarised in the delimitation of the scope of application of the exempting norm contained in No. 1 of article 20 of Decree-Law No. 423/83, of 5 December – is a matter that this TAS can only decide in accordance with the jurisprudence established by the Supreme Administrative Court and that is majority in CAAD.

The jurisprudence of the Supreme Administrative Court is clear: the exempting norm here in question only covers "installation" and not "exploitation". And situations such as that which occurred with the Claimant fall within the notion of "exploitation", and therefore, outside the scope of application of the fiscal benefit.

Faced with a matter with such unanimity of readings by the holders of the highest Judicial Court (the Supreme Administrative Court) and in view of what has been decided in CAAD, we see no reason to understand it differently here, because, moreover, we adhere to the grounds set forth in the Supreme Administrative Court judgment cited by AT in its response, including in the aspect of the separation of what is installation versus exploitation and regarding the delimitation of the concepts.

Let us say that, if this were not the case, the truth is that, in substance, the Claimant would benefit from two IMT exemptions (economic benefits) directly or indirectly:

• One at the level of installation attributed to the developer (when lands or buildings are acquired to install the undertaking), which will subsequently permit acquisition of the fractions at lower values (with the correlative increase of its patrimony indirectly);

• Another as an acquirer of the autonomous fractions (in which it increases its patrimony directly).

If the Claimant intends to characterise the acquisition of the autonomous fractions at the level of the economic viability of the undertaking in the first phase: that of installation, the acquisitions that took place there already benefited economically from the IMT exemption. The economic benefit corresponding to it has already occurred, albeit indirectly.

To argue, by this fact, that it would then still have the right to another subsequent fiscal benefit (on the acquisition of accommodation units) is what seems to us questionable. Indeed, the Claimant already had, in the "installation phase", an implicit "patrimonial increment", which certainly made it possible to support a lower price in the acquisition.

• As to the nature of the fiscal benefit and its subsistence in the legal order, well or poorly conferred on the date of occurrence of the tax event (the acquisition of the autonomous fractions) and its relevance in view of the assessment here impugned.

We are faced with a fiscal benefit that AT considers to be of an automatic nature in the dimension of No. 1 of article 5 of the Fiscal Benefits Code. It depends on the law or in the majority of identical cases it is configured to depend. Insofar as it has this nature, its attribution or verification does not generate an administrative act, and therefore its extinction, by revocation, under No. 4 of article 14 of the Fiscal Benefits Code, is not possible.

The question that arises in this process has, however, another dimension: that of access to tax justice (right to challenge and appeal).

Access to tax justice – in the jurisdictional dimension – seems to us to must be as broad as possible, in practical terms and not in a merely programmatic dimension as might appear from the reading of the general rule of article 9 of the General Tax Law (and article 96 of the Code of Tax Procedure).

At the level of ordinary tax law, it is article 95 of the General Tax Law (and article 97 of the Code of Tax Procedure) that specifies, exemplifying, the acts harmful to rights and legally protected interests that may be subject to jurisdictional pleading.

Access to tax justice – in the dimension of the gracious procedure – (article 54 of the General Tax Law and article 44 of the Code of Tax Procedure) must also be as broad as possible, insofar as it aims at creating administrative decisions, with the participation of the taxpayers, which allow them, subsequently, if they wish, to settle their disagreements in the organs of sovereignty of the administration of justice.

In the case, since it is a question of the existence or otherwise of a right to a fiscal benefit, see subsections d) and i) of No. 1 of article 44 of the Code of Tax Procedure, read in the meaning of subsection c) of No. 1 of article 60 of the Code of Tax Procedure, that is, "any benefit" (the law does not speak of an administrative act that confers fiscal benefits) to be considered extinct, non-existent in the legal order, it seems that it must be preceded by a procedure aimed at obtaining a decision (an act) susceptible of permitting the taxpayer to act before the courts.

In this process what happens is that it is considered, (by the fact that the fiscal benefit contained in the exempting norm of No. 1 of article 20 of Decree-Law No. 423/83, of 05 December, is configured as of an automatic nature), that there is no administrative act that results from a procedure of granting the IMT exemption and as such, there being no administrative act, it is not possible to revoke what does not exist, as an administrative act performed by AT.

However, in this case, this assertion is questionable – as AT itself states in articles 49 and 52 of its response – since not only the Notary and the Conservator of the Property Register "supervised" the granting of the fiscal benefit.

It is noted that, in the response, AT did not address this aspect which seems to us to be of significant importance: it is that the assessment of IMT, the issuance of DUC at zero rate (thus the verification of the presuppositions of the fiscal benefit which is now alleged to have been wrongly attributed) was carried out by AT Services: the Finance Service of Loures.

That is, it is not clear that one should refer, without more, that this exemption is crystallinely of an automatic nature, since AT intervened in the issuance of the document of IMT assessment at zero rate.

Even so the tax was assessed and more than that: compensatory interest was charged from the date of occurrence of the tax event, and it is certain that this interest is only due when assessment is delayed due to a fact attributable to the passive subject (No. 1 of article 35 of the General Tax Law)

Non-automatic benefits (those dependent on recognition) "presuppose one or more subsequent acts of recognition" (No. 1 of article 5 of the Fiscal Benefits Code).

The Claimant considers that the act of assessment of IMT revoked the fiscal benefit (article 48 of the request for pronouncement), which we do not accept, given the lack of procedural co-existence between the moments of application of the rule of incidence (notification of 13.11.2014) and that of application of the exempting norm (the date of the tax event: the deed of purchase and sale of 04.07.2012).

It seems to us that there is a factual misunderstanding: the benefit, even if it were unequivocally automatic and of operation "ope legis" (which, as has been stated, in the case, is questionable in view of the prior intervention of AT in the issuance of the DUC at zero rate by means of a declaration for assessment presented by the taxpayer), well or poorly attributed, exists in the legal order from the date of issuance of the document by AT, was verified by AT services and is recorded in the deed. In this case the Notary and the Conservator of the Property Register merely respected the content of the document issued by AT itself.

To start from the principle that, there being no administrative act – culminating in a formal procedure of verification of the presuppositions of the fiscal benefit – that recognised the fiscal benefit, this act itself, contained in the document … … … … … of 29.06.2012 with the assessment of IMT of 0.00 euros (even if it is understood that by definition it is not an administrative act in the dimension of article 120 of the old Administrative Procedure Code) does not exist, is what does not seem to us to be in conformity with the reality of the facts.

From our point of view, this understanding, implicitly carried into practice by AT, contends with the right to tax justice, in the two dimensions referred to above.

It is that AT merely carried out an inspection procedure and from this passed to the assessment procedure, without first opening a procedure aimed at the discussion of the concrete presuppositions of the benefit and, above all, aimed at obtaining an act, a decision that would permit the taxpayer to discuss the right to the fiscal benefit in concrete terms, in an administrative special action. Hence the taxpayer comes, in this process, to discuss this right, as an interrupting fact that would hinder the assessment.

It would above all permit, this procedural autonomisation (and consequent autonomisation at the jurisdictional level), to ascertain whether or not the presuppositions exist for the assessment of compensatory interest, that is, to determine the "fact attributable to the passive subject" (No. 1 of article 35 of the General Tax Law), or at least would permit fixing the date from which the fiscal benefit would cease to exist in the legal order, with obvious implication for the date from which compensatory interest would be due to be imputed to the taxpayer.

It is that, as has already been stated, unless there is procedural co-existence between the moments of application of the rule of incidence and that of the exempting norm, the assessment procedure, does not seem to us to be the adequate means to revoke, to nullify, any fiscal benefit, even automatic and of operation ope legis, which in the case, it is noted, is questionable that it should be considered.

On the other hand the tax inspection procedure would not be adequate, in this case, to produce an administrative decision subject to direct judicial scrutiny (subsection a) of No. 1 of article 12 of the Code of Tax Inspection Procedure). As a rule the conclusions of inspection reports are not challengeable (article 11 of the Code of Tax Inspection Procedure).

It is that the right to fiscal benefits is something that stands above the very public interest that imposes taxation. The law is clear. It is stated in No. 1 of article 2 of the Fiscal Benefits Code that "are considered fiscal benefits the measures of an exceptional character instituted for the protection of extrafisc public interests relevant that are superior to those of taxation itself which they prevent".

It is for this reason that No. 8 of article 14 of the Fiscal Benefits Code states that "It is prohibited to renounce automatic fiscal benefits and those dependent on official recognition, though it is permitted for fiscal benefits dependent on request of the interested party, as well as those contained in an agreement, provided it is accepted by the tax administration".

We are faced with a right with a protection potentially inalienable by taxpayers.

What is said above regarding the conclusions of the tax inspection report does not seem to collide with the jurisprudence regarding the unnecessary nature of prior hearing of taxpayers in assessment procedure when on the matter they have already been heard in the course of tax inspection (No. 3 of article 60 of the General Tax Law) – e.g. the Supreme Administrative Court Judgment of 16.05.2007, appeal 186/07 at www.dgsi.pt. It is that the corrections to the taxable matter is something different from extinction or declaration in non-conformity with law of a fiscal benefit attributed, which exists in the legal order, well or poorly conferred and in this case derives from a document issued by AT before the date of the execution of the deed.

It seems to us that the crucial question which the TAS should answer is the following:

• The fiscal benefit contained in the exempting norm contained in No. 1 of article 20 of Decree-Law 423/83, of 05 December, which is mentioned in the deed of purchase and sale executed on 2012.07.04, in which the Claimant is the acquirer and C… SA is the seller, the subject matter of which are the autonomous fractions designated by the letters "…" and "…" (integrated in the Tourist Undertaking designated "B…") of the urban property located in …, parish and municipality of ..., registered in the property register under articles … and … parish of ..., in the following manner: "Declaration for assessment of the municipal tax on onerous transfers of real property number … … … … …, assessed on 29.06.2012, in the amount of € 0.00 (Benefit 33 – Tourist Utility – article 20 of Decree-Law No. 423/83) " was implicitly declared illegal, and therefore extinct, by the act of assessment carried out by AT and which is referred to in paragraph c) of this Report?

From the answer to this question will result the admissibility or inadmissibility of the request, and, if the answer is to the effect that the procedure of declaration of illegality of the fiscal benefit contained in the deed (and which results from the issuance by AT of a DUC of assessment of IMT at zero rate) was omitted, in order to obtain a decision that would permit the protection of jurisdictional action regarding the concrete question of the right to the fiscal benefit and its declaration in non-conformity with law, with relevance, at least, in the ascertainment of compensatory interest, it will not be necessary for the TAS to pronounce itself on the remaining grounds invoked by the Claimant in the request for pronouncement, with eventual reflection on the validity of the acts of assessment, by manifest pointlessness.

III. FACTUAL MATTER PROVED AND NOT PROVED SUBSTANTIATION

With relevance for the decision which will be adopted, these are the facts which are considered proved, indicating the respective documents (proof by documents), as substantiation.

Facts Proved

  1. To the tourist undertaking designated "B…", whose constitutive deed was deposited with the Institute of Portugal, IP on 26.05.2009, "tourist utility" was attributed by order no. …/2010 of the Office of the Secretary of State for Tourism of ……..2010, published in the Official Gazette, 2nd Series, no. …, of … of … of 2010 – in accordance with document no. 1 attached with the request for pronouncement (final part of the public deed of purchase and sale), article 3 of the request for pronouncement and points 6.7 and 6.8 of the response.

  2. By deed of purchase and sale executed on 2012.07.04, the Claimant acquired from C… SA, the autonomous fractions designated by the letters "…" and "…" (integrated in the tourist undertaking designated "B…") of the urban property located in …, parish and municipality of ..., registered in the property register under articles … and … parish of ... – in accordance with document no. 1 attached with the request for pronouncement (public deed of purchase and sale), article 2 of the request for pronouncement and points 6.2, 6.3 and 6.4 of the response.

  3. In the deed of purchase and sale referred to in the preceding paragraph, it is stated, regarding payment of the municipal tax on onerous transfers of real property (IMT), as follows: "declaration for assessment of the municipal tax on onerous transfers of real property, number … … … … …, assessed on 29.06.2012, in the amount of € 0.00 (Benefit 33 – Tourist Utility – article 20 of Decree-Law No. 423/83)" – in accordance with document no. 1 attached with the request for pronouncement (public deed of purchase and sale).

  4. Prior to the execution of the deed the Claimant submitted to the Finance Service of Loures-… the declaration of assessment of IMT of Form 1, including Annex III, indicating in section V-48 of this form, benefit 33, having been issued to it by the Finance Service, as the passive subject, the document …, with 0.00 euros of IMT assessed and dated 29.06.2012, indicating in seller of the property-1 and in seller of the property-2 "benefit 33 – tourist utility (article 20 of Decree-Law 423/83) 100% on the taxable matter" – article 4 of the request for pronouncement and document no. 2 in annex to the request for pronouncement.

  5. By Service Order no. OI 2014… of 28.03.2014, issued by the Tax Inspection Services of the Financial Directorate of Faro, an inspection procedure was promoted, internal and of partial scope, in the matter of IMT, for the year 2012 and concerning the facts referred to in 2) and 3) – Document no. 3 in annex to the request for pronouncement and point 6.15 of the response.

  6. In the course of the procedure referred to in the preceding paragraph, the Claimant was notified to exercise the right of prior hearing regarding the draft report which concluded that the acquisition of the autonomous fractions had unduly benefited from the IMT exemption provided for in No. 1 of article 20 of Decree-Law No. 423/83, of 5 December, and that there was a failure to assess IMT in the amount of 19,833.80 euros, this right having been exercised on 26.08.2014 – articles 5 to 7 of the request for pronouncement, document no. 3 attached with the request for pronouncement and point 6.15 of the response.

  7. The tax inspection maintained its understanding and converted the draft report into a final one, the corrections sanctioned by the tax inspection having been notified to the Claimant by official letter of 10/09/2014 – points 6.16 and 6.17 of the response and pages 128 of the PA.

  8. By official letter … of 12.11.2014, the Claimant was notified of the assessment of IMT of 19,832.80 and compensatory interest of 1,719.20 euros, totalling 21,552.00 euros – article 8 of the request for pronouncement and document no. 5 in annex to the request for pronouncement.

  9. On 26.02.2015, the Claimant lodged a gracious complaint, exercised the right of prior hearing on 06.04.2015, disagreeing with the draft decision of denial, having on 09.04.2015 been notified of the decision of denial, maintaining the conclusions of the inspection report – articles 9 to 14 of the request for pronouncement, documents nos. 6 to 9 attached with the request for pronouncement and points 6.19 to 6.21 of the response.

  10. The Claimant paid on 27/02/2015 the amount of € 21,522.00, after an enforcement proceeding no. …2015… had been instituted, for failure to pay the assessment of IMT and interest – point 6.18 of the response.

  11. On 08-07-2015, the Claimant filed the present request for pronouncement with CAAD – entry record in the SGP of the request for pronouncement.

Facts Not Proved

There is no other factuality alleged that has not been considered proved and that is relevant to the composition of the case.

It is noted that it was not proved that the fiscal benefit was recognised by the Notary as alleged in point 6.5 of the response, which would contradict what was proved in 3) and 4) of the established factual matter.

IV. EXAMINATION OF THE QUESTIONS WHICH THE TAS MUST RESOLVE

• Tax Procedure

Regarding the subject matter of exemptions and concerning tax procedure – articles 54 of the General Tax Law and 44 of the Code of Tax Procedure – it is verified that "the tax procedure comprises the entire succession of acts directed at the declaration of tax rights, namely: the recognition and revocation of fiscal benefits" (subsection d) of No. 1 of article 54 of the General Tax Law).

From the outset, a particularity may be noted here. The General Tax Law, in addition to not being exhaustive, does not refer to "revoke acts that grant fiscal benefits", it is much more comprehensive when it refers to "revocation of fiscal benefits". The expression "revocation" (from the Latin "revocare") seems to should be understood in a common meaning of "to invalidate the effect of something; rescind or annul. To terminate the effects of a law, of a juridical act etc."

That is, from this norm, it is not permitted to draw the reading that a fiscal benefit, even automatic, of operation "ope legis", whose presuppositions were verified by the Notary and expressed in the deed, should not be the subject of an autonomous procedure aimed at the verification of its possible illegality, also so that the taxpayer can use the jurisdictional means to discuss the matter, with relevance in the assessment of compensatory interest or determination of the date from which it is due.

The apparently more restrictive wording of subsection d) of No. 1 of article 44 of the Code of Tax Procedure, which would only require an autonomous procedure when there is an administrative act that has granted the benefit, will not be preventive of what has just been stated, taking into account the very broad norm that is contained in subsection i) of No. 1 of article 44 of the Code of Tax Procedure.

It will be in article 60, No. 1, subsection c) of the General Tax Law that the answer which seems to us clear for this question will be found. There it is stated that there is "right of hearing before the revocation of any benefit or administrative act in tax matters".

The inspection procedure will not be the adequate means to cause a fiscal benefit to cease, it is not its purpose, nor is the final report, in principle, susceptible to autonomous judicial challenge, and therefore the hearing carried out there cannot fill the requirements of subsection c) of No. 1 of article 60 of the General Tax Law, with the norm of No. 3 of article 60 of the General Tax Law not applying.

• Tax Judicial Procedure

Apparently, subsection f) of No. 1 of article 95 of the General Tax Law, when it refers to acts of "denial of requests for exemption or fiscal benefits whenever their granting is dependent on an autonomous procedure" seems that it would exclude from the right to judicial challenge and appeal, acts of revocation of fiscal benefits, whether these have been the subject of administrative recognition in a non-autonomous procedure, or have operated "ope legis" in an automatic manner.

But this reading seems to be ruled out by subsection h), where this right is foreseen regarding "other administrative acts in tax matters".

In a note to article 95 of the General Tax Law, 4th Edition 2012 by Diogo Leite de Campos, Benjamim Silva Rodrigues and Jorge Lopes de Sousa, pages 830 and 831, it is stated:

"The qualification as harmful acts of acts of denial of requests for exemption or fiscal benefits when their granting is dependent on an autonomous procedure is based on the circumstance that such acts constitute the final act of a specific legal procedure subject to its own rules aimed at the obtaining or recognition of the benefit that are not procedurally connected with those of the tax assessment procedure.

The denying act of the exemption assumes, in such case, the nature of a mere act external to the process of assessment of the tax. This characterisation is expressed in subsection f) of No. 2 of article 95 of the General Tax Law…

…

Differently do things happen in the hypotheses of fiscal benefits of automatic granting or of those dependent on recognition that takes place in the tax assessment procedure: here the harmful act subject to appeal is the act of assessment of the tax given the procedural co-existence existing between the moments of application of the rule of incidence and of the exempting norm (negative incidence).

The assessment of tax against a norm of automatic recognition is struck by illegality because it is also automatically paralysed the potentiality of the rule of taxation to generate the obligation of tax assessed.

The same happens in the case of a benefit dependent on recognition to be effected in the administrative process directed at the assessment of the tax: the act that denies it then assumes itself as a mere preparatory and prejudicial act to the act of declaration of tax rights (article 54 of the General Tax Law), being covered by the unitary challenge."

Naturally, these principles will have to be applied to situations of revocation, extinction or verification of illegality of tax exemptions, that is, any procedural means to terminate a fiscal benefit that exists in the legal order, even if it has been wrongly attributed or considered.

Also subsection p) of No. 1 of article 97 of the Code of Tax Procedure apparently seems to restrict contentious appeals – administrative special action – to situations where there is denial or revocation of exemptions or benefits "by administrative act". But the expression "dependent on recognition" should be measured only against the benefits referred to in article 65 of the Code of Tax Procedure.

This restrictive reading of the law does not seem to be the best, in view of the general principle of article 9 of the General Tax Law and of No. 1 of article 20 of the Constitutional Law: full and effective protection of all rights or legally protected interests.

And also here the final part of subsection p) of No. 1 of article 97 of the Code of Tax Procedure contains the comprehensive expression: "as well as other administrative acts relating to tax questions that do not entail the assessment of the legality of the act of assessment".

In view of the above, it seems that it should be concluded that unitary challenge (of the assessment act vs. right to fiscal exemptions) will only exist when the right to fiscal benefits whose recognition or operation occurs simultaneously with the act of assessment is discussed, and no longer when there is no "procedural co-existence between the moments of application of the rule of incidence and of the exempting norm (negative incidence)".

In cases where there is no (or should not exist) unitary challenge (as in the case of this process if the benefit is considered to be of an automatic nature), an autonomous tax procedure is required aimed at obtaining a decision from AT declaring the possible illegality of the verification of the presuppositions of the automatic fiscal benefit that appears, for example, in a public deed, to permit a possible autonomous challenge of this decision.

That is, even if these are automatic fiscal benefits, it seems to us, in view of the above, that in tax assessment procedures only those which have procedural co-existence (and obviously factual) between the moments of application of the rule of incidence and of the exempting norm should be considered or not considered there, under penalty of the general principle of article 9 of the General Tax Law and of No. 1 of article 20 of the Constitutional Law: full and effective protection of all rights or legally protected interests, being called into question.

The conclusion to which we have arrived does not seem to collide or call into question the consideration that the right to assessment of IMT is "original" in accordance with article 35-1 of the IMT Code and article 45-1 and 4 of the General Tax Law (within the period of 8 years counted from the occurrence of the tax event). It is not that which is in question. What is in question is whether or not to exclude from the tax procedure the interrupting fact of taxation – the fiscal exemption – that exists in the legal order, well or poorly considered at the time the tax event occurred (the onerous acquisition of goods). To consider that the benefit does not exist in the legal order is what is not in harmony with the material and real truth of the facts.

• Automatic or recognition-dependent benefit?

In view of the factual accrual proved in 3) and 4) of Part III of this decision, it seems to us very difficult to argue that in view of the tenor of No. 1 of article 5 of the Fiscal Benefits Code, this is crystallinely an automatic fiscal benefit. Thus concluding is to devalue the function and utility of the Finance Service in issuing the DUC at zero rate (with 0.00 euros of assessment).

Benefits dependent on recognition "presuppose one or more subsequent acts of recognition" (No. 1 of article 5 of the Fiscal Benefits Code).

Now, if a declaration for assessment is required, Form 1 of the IMT, and if a DUC of assessment of IMT is required, even if this results, as to the fiscal benefit, from the fact that it was placed, by the taxpayer, in the declaration, the code of benefit 33, it would be to disregard the truth of the facts if we consider, even so, the benefit as automatic.

This benefit does not configure itself, with this bureaucratic procedure, as automatic, but rather as dependent on two subsequent acts: the submission of Form 1 for assessment where it is indicated (requested) and the obtaining of a DUC at zero rate issued by AT where it is or is not considered. And in this case it was considered.

It seems indisputable that, for a fiscal benefit that operates in this manner, it cannot be said that it is recognised by the Notary. In this case it was not. The Notary merely relied on the documents that were obtained at AT and wrote in the deed: "declaration for assessment of the municipal tax on onerous transfers of real property, number …, assessed on 29.06.2012, in the amount of € 0.00 (Benefit 33 – Tourist Utility – article 20 of Decree-Law No. 423/83)".

Let it not be said that only the benefits obtained through the procedural means of article 65 of the Code of Tax Procedure can be considered dependent on recognition. From the outset, No. 1 of article 65 of the Code of Tax Procedure refers "unless otherwise provided".

However, even if it were not thus, the requirement of Form 1 of the IMT and of subsequent issuance of a DUC at zero rate by AT seems to reasonably fill the requirements of article 65 of the Code of Tax Procedure.

It is still not completely irrelevant the consideration (as the Claimant argues) that, in view of the reality of the facts (paragraphs 3) and 4) of the proved matter) there was formed a true administrative act of recognition of the fiscal benefit, in the definition of article 120 of the old Administrative Procedure Code.

It seems to the TAS that, in this case, the fiscal benefit in question, in view of the manner in which it is documented and operated in the relationship between the parties, falls within the definition of the final part of No. 1 of article 5 of the Fiscal Benefits Code, although it was not attributed or verified in an autonomous procedure, since it resulted from a declaration, an essential initiative sine qua non, for the assessment of IMT by the taxpayer, culminating in the issuance by AT of a DUC of assessment at zero rate (which will have an effect equivalent to the recognition of the fiscal benefit).

• The fiscal benefit contained in the exempting norm contained in No. 1 of article 20 of Decree-Law 423/83, of 05 December, which is mentioned in the deed of purchase and sale executed on 2012.07.04, in the following manner: "Declaration for assessment of the municipal tax on onerous transfers of real property, number …, assessed on 29.06.2012, in the amount of € 0.00 (Benefit 33 – Tourist Utility – article 20 of Decree-Law No. 423/83) " was implicitly declared illegal, and therefore extinct, by the act of assessment carried out by AT and which is referred to in paragraph c) of this Report?

As has been stated, the inspection procedure does not seem to us to be the adequate means to cause a fiscal benefit that exists factually in the legal order to cease, well or poorly verified as to its presuppositions, since it is not its purpose, nor is the final report, in principle, susceptible to autonomous judicial challenge.

In this case, there does not configure itself to occur procedural co-existence between the moments of factual application of the rule of incidence of IMT (2014, albeit it is a matter of the original exercise of an assessment) and that of application of the exempting norm of IMT (2012.07.04), since, it is noted, it cannot be considered that the verification of the presuppositions of the IMT exemption in 2012 does not exist, even if it can be considered, now, that this verification was not in conformity with the law.

In this manner we must conclude that the fiscal benefit which is contained in paragraph 3) of the established factual matter, measured against the date of 2012.07.04, exists still in the legal order, well or poorly verified as to its presuppositions on that date, until it is declared in non-conformity with the law, through the procedure pertaining to this specific purpose.

In fact, from what has been expressed above, it does not seem to us either that the assessment procedure instituted in 2014 be, in this case, the adequate means for its declaration in non-conformity with the law, for the reasons and grounds indicated above.

With the grounds expressed above, the IMT assessment impugned, carried out without previously being declared non-conforming with law the exemption (as an interrupting fact of taxation) that factually appears in the deed, does not seem to us to be in harmony with the norms contained in article 5, No. 1 of the Fiscal Benefits Code; in article 9 and article 54, No. 1, subsection d) of the General Tax Law; article 44, No. 1, subsection i) of the Code of Tax Procedure; article 95, No. 1, subsection h) of the General Tax Law; articles 96, No. 1, and 97, No. 1, subsection p), final part of the Code of Tax Procedure, occurring, in this manner, the illegality provided for in subsection a) of article 99 of the Code of Tax Procedure.

V. RULING

On the basis and with the grounds set out above, the tribunal rules:

  1. The request of the Claimant is admissible, annulling the assessment of IMT and compensatory interest referred to in paragraph c) of the Report.

  2. The obligation of restitution of the amount paid by the taxpayer is a consequence of the annulment of the assessments.

Value of the case: in accordance with the provision in article 3, No. 2, of the Regulation of Costs in Tax Arbitration Procedures (and subsection a) of No. 1 of article 97-A of the Code of Tax Procedure), the case is assigned the value of 21,552.00 euros.

Costs: in accordance with the provision in article 22, No. 4, of RJAT, the amount of costs is fixed at € 1,224.00 euros, according to Table I attached to the Regulation of Costs in Tax Arbitration Procedures, to be borne by the Respondent.

Let this be notified.

Lisbon, 25 November 2015

Singular Arbitral Tribunal (TAS),

Augusto Vieira

Text prepared on computer in accordance with the provision in article 131, No. 5, of the Code of Civil Procedure, applicable by referral of article 29 of RJAT.

The wording of this decision is governed by the spelling prior to the Orthographic Agreement of 1990.

Frequently Asked Questions

Automatically Created

What is the IMT tax exemption for qualified tourism enterprises under Portuguese law?
The IMT tax exemption for qualified tourism enterprises under Portuguese law is established in Article 20 of Decree-Law 423/83 of December 5, 1983. This exemption was designed to facilitate the installation process of tourism undertakings of public utility by exempting from IMT the onerous acquisition of properties destined for qualified tourism developments. The exemption applies to properties that are part of tourism undertakings that have received official recognition of 'tourist utility' status from the Secretary of State for Tourism. The rationale is to encourage investment in the tourism sector by reducing the tax burden during the critical installation phase of tourism projects. However, the application and scope of this exemption have been subject to interpretation disputes, particularly regarding whether the exemption applies to all acquisitions during the validity period of the tourist utility classification or only to initial installations.
How does Article 20 of Decree-Law 423/83 apply to IMT exemptions for tourist developments?
Article 20 of Decree-Law 423/83 applies to IMT exemptions by creating an interrupting fact of taxation for properties destined for qualified tourism developments. The provision aims to facilitate the installation of undertakings of public utility in the tourism sector. For the exemption to apply, the property must be acquired with the intention of being integrated into a tourism undertaking that has received official recognition of 'tourist utility' status through publication in the Official Gazette. The acquisition must occur during the validity period of this tourist utility classification. In the case at hand, the tourist utility was recognized for 36 months from April 2010, and the acquisition took place in July 2012, falling within this validity period. The Finance Service initially recognized the exemption by issuing a DUC (Documento Único de Cobrança) at zero rate, which was presented at the notary during the deed execution. However, disputes arise when the Tax Authority later questions whether subsequent acquisitions of fractions within an already existing tourism undertaking qualify for the exemption.
Can the Tax Authority revoke an IMT exemption previously granted at zero rate for tourism properties?
The question of whether the Tax Authority can revoke an IMT exemption previously granted at zero rate is central to this case. The claimant argues that the initial issuance of the DUC at zero rate by the Loures Finance Service constituted a definitive administrative act granting the exemption, which cannot be revoked beyond the one-year period established in Articles 136 and 141 of the Portuguese Administrative Procedure Code. The claimant also invokes the principle of legitimate expectations and legal certainty, arguing that it relied on the Finance Service's validation when acquiring the properties. Additionally, the claimant contends that the Tax Authority violated the principle of good faith by initially granting the exemption and then retroactively assessing the tax more than two years later. The counterargument typically raised by tax authorities is that an incorrect application of tax law does not create acquired rights, and that ex officio assessments can be made within the prescription period when an exemption was improperly granted. The resolution of such disputes depends on balancing the principles of tax legality and correct application of tax law against the protection of legitimate expectations.
What role does the principle of legitimate expectations play in IMT exemption disputes before CAAD?
The principle of legitimate expectations plays a crucial role in IMT exemption disputes before CAAD (Centro de Arbitragem Administrativa). This principle, rooted in the constitutional principle of legal certainty inherent in the Rule of Law (Article 2 of the Portuguese Constitution), protects taxpayers who reasonably rely on official acts by tax authorities. In this case, the claimant argues that the Finance Service's issuance of the DUC at zero rate created a legitimate expectation that the IMT exemption was properly granted. The claimant structured the acquisition based on this official validation, which was also accepted by the notary executing the deed. The principle of legitimate expectations is reinforced by the principle of trust and good faith in administrative action (Article 6-A of the Administrative Procedure Code and Article 226-2 of the Constitution). CAAD arbitral tribunals must weigh this principle against the principle of tax legality, which requires correct application of tax law. The absence of published guidelines from the Tax Authority on the interpretation of Article 20 of Decree-Law 423/83 (as required by Article 68-A of the General Tax Law) strengthens the claimant's argument that the Tax Authority violated legitimate expectations by changing its position without prior notice.
How do you challenge an IMT reassessment through CAAD tax arbitration in Portugal?
To challenge an IMT reassessment through CAAD tax arbitration in Portugal, taxpayers must follow a specific procedural path. First, upon receiving notification of an ex officio IMT assessment, the taxpayer should file a gracious complaint (reclamação graciosa) with the Tax Authority within the legal deadline. In this case, the claimant filed the gracious complaint on February 26, 2015, after being notified of the assessment in November 2014. If the gracious complaint is denied, the taxpayer has 90 days from notification of the denial to file a request for arbitration with CAAD under Article 10-1(a) of the Legal Framework for Arbitration in Tax Matters (RJAT). The request must be signed by a lawyer and should detail the grounds for contesting the assessment, including factual background, legal arguments, and supporting documentation. Once CAAD accepts the request, a singular arbitral tribunal (TAS) is constituted. The Tax Authority is notified and must respond, providing the administrative file. Both parties may submit written arguments and supporting evidence. The arbitral tribunal then issues a binding decision on the legality of the assessment, which can annul the tax assessment if found to be contrary to law.