IMT Tax Exemption for Tourism Enterprises Under Decree-Law 423/83: CAAD Arbitration Ruling

ARBITRAL DECISION

Parties

Claimant – A..., S.A. NIPC PT..., with registered office at ..., ..., ...-... Lisbon.

Respondent – AUTHORITY FOR TAX AND CUSTOMS (AT).

I. REPORT

a) On 09-07-2015, the Claimant filed with CAAD a request for the establishment of a singular arbitral tribunal (TAS) under the Legal Framework for Arbitration in Tax Matters (RJAT).

b) The request is signed by an attorney acting in representation of the Claimant.

THE REQUEST

c) The Claimant requests the annulment of additional assessments of Municipal Property Transfer Tax – IMT (tax collection and interest), relating to the taxable event consisting of the acquisition of the right of full property, by deed of dation in payment dated 30.03.2010, of an urban property comprising a building intended for services, located at Rua ... nº..., described in the Land Registry Office under nº ... and registered under article ...º (current article ...º), in the parish of ... and ... and Municipality of Portalegre, corresponding to the tourist enterprise "B...".

d) Assessments that resulted from a written request (via email) sent by the Claimant on 27.03.2015 to the Respondent, prompting the issuance of payment notices and generating an IMT collection of 396,500.00 and compensatory interest of 79,343.45 euros, for a total of 475,843.45 euros.

e) The assessments (IMT and interest) now being challenged appear in the single collection document... of 10.04.2015. For this reason,

f) It alleges that the acquisition was made on the assumption that the operation benefited from IMT exemption and reduction of Stamp Tax (IS) under article 20º of Decree-Law nº 423/83, of 05.12, with a view to the "installation of a tourist enterprise intended for tourist operation" and which was meant to "allow the continuity of the process of installation of the enterprise of tourist utility".

g) Concluding that the prerequisites of the impugned assessment(s) do not exist, since the prerequisites of legality, security and typicality are not met, in addition to a lack of reasoning, since it maintains that the prerequisites of application of the exempting rule contained in article 20º of Decree-Law nº 423/83, of 05.12 are met.

h) It also objects to the impugned acts for violating, in particular, the principles of prohibition of retroactivity and of legal certainty and security, inasmuch as the Respondent "recognized the IMT exemption prior to the execution of the public deed", "having ... presented in the public deed the documents confirming its application, which also received validation from the Notary responsible".

i) And that the assessments were not preceded by the issuance of general guidelines which it considers an essential formality, thus breaching the principle of cooperation by AT with taxpayers and the principle of good faith, for which reason the payment of the assessments could not be required.

j) Finally, it invokes that the revocation of the exemption, resulting from the filing of the IMT Model 1 declaration and the subsequent issuance of the DUC (which it considers to constitute an act creating rights), could only be implemented within a period of 1 year from the date of the deed (of the taxable event) of 30.03.2010, and is illegal for violating the content of the rule contained in article 141º of the CPA.

k) It concludes by requesting the annulment of the assessments, with the consequent reimbursement of the total amount paid, plus indemnificatory interest.

REGARDING THE COLLECTIVE ARBITRAL TRIBUNAL (TAC)

l) The request for establishment of the TAC was accepted by the President of CAAD and automatically notified to AT on 16-07-2015.

m) By the CAAD Ethics Council three arbitrators were appointed, including the first two signatories of this decision, and the parties were notified thereof on 28-08-2015. The parties did not manifest a desire to refuse the appointment, in accordance with the combined terms of article 11.º n.º 1 subsections a) and b) of RJAT and articles 6.º and 7.º of the Ethics Code.

n) Accordingly, the Collective Arbitral Tribunal (TAC) has been duly constituted since 14-09-2015 to hear and decide the subject matter of this dispute (articles 2.º, n.º 1, subsection a) and 30.º, n.º 1, of RJAT).

o) All of these acts are documented in the communication of establishment of the Collective Arbitral Tribunal dated 14-09-2015, which is hereby reproduced.

p) Subsequently, the distinguished arbitrator appointed in the third position indicated in the document referred to in the preceding passage requested recusal, which was considered justified by the President of the Ethics Council of CAAD, by order dated 04.12.2015, notified to the parties on the same date.

q) In the same order, a new arbitrator was appointed as a substitute, now indicated in the third position of this decision, and the parties likewise did not manifest a desire to refuse this appointment, in accordance with the combined terms of article 11.º n.º 1 subsections a) and b) of RJAT and articles 6.º and 7.º of the Ethics Code.

r) AT was notified on 15-09-2015 pursuant to article 17º-1 of RJAT. It responded on 19.10.2015 by submitting the Administrative File (PA), composed of Annex 1 (with 13 pages), Annex 2 (with 10 pages), Annex 3 (with 14 pages), Annex 4 (with 12 pages) and Annex 5 (with 9 pages), all in computerized format.

s) By order of the TAC dated 21.10.2015, the holding of the meeting of parties referred to in article 18º of RJAT was waived as its prerequisites were not met. In this order, a deadline of 10 days was set for submission of written and successive arguments.

t) Both the Claimant (submission of 02.11.2015) and the Respondent (submission of 11.11.2015) chose not to submit formal arguments, but reiterated the positions already defended, respectively, in the request for pronouncement and in the response.

PROCEDURAL PREREQUISITES

u) Legitimacy, capacity and representation - The parties possess legal personality, judicial capacity, are legitimate and are represented (articles 4.º and 10.º, n.º 2, of RJAT and article 1.º of Ordinance nº 112-A/2011, of 22 March).

v) Contradiction - AT was notified pursuant to section r). All procedural documents and all documents attached to the file were made available to the respective opposing party in the CAAD Case Management System.

w) Dilatory exceptions - The arbitration procedure does not suffer from nullities and the request for arbitral pronouncement is timely, as it was submitted within the prescribed deadline in subsection a) of n.º 1 of article 10.º of RJAT. In effect,

The Claimant alleges to have been notified on 10.04.2015 of the IMT assessment made by the Finance Service of Portalegre. The Respondent did not challenge that date; rather, it confirmed it in point 46 of its response. Since the request for pronouncement was filed with CAAD on 08.07.2015, and there is no other element in the file permitting the conclusion that the filing of the request for pronouncement with CAAD on the stated date was untimely, the TAC considers this procedural prerequisite to be met.

SUMMARY OF THE CLAIMANT'S POSITION

x) The Claimant maintains that the acquisition of the real property indicated above benefits from the IMT exemption contained in article 20º of Decree-Law 423/83, of 05.12, alleging that it is an objective exemption "intended to benefit the realization of the process of installation of enterprises of public utility" and it was on this basis of functioning of the exempting rule that it acquired it.

y) Adding that the Tax Authority "confirmed and validated in a timely manner the application of the IMT exemption", with the zero-rated assessment document being presented to the Notary, who also validated the application of the IMT exemption.

z) And that the acquisition "was made with a view to installing the tourist enterprise intended for tourist operation", that is, "the acquired real property was assigned legally and economically to the tourist enterprise, with a view to enabling its complete installation".

aa) Since the "tourist utility" of the enterprise was recognized for a period of 7 years until 12 June 2016, the acquisition of the real property took place during the period of validity of the "tourist utility", concluding that for this reason "it was meant to allow the continuity of the process of installation of the enterprise".

bb) It states that no taxable event was constituted on the date of the assessment(s) now being challenged because the verification of the prerequisites upon which the taxability of the tax depends was not proven, and therefore the assessment act constitutes the creation of a true tax, being null for lack of authority to create a tax not permitted by law.

cc) And it further alleges that the impugned act suffers from a lack of factual and legal reasoning, or at least is insufficient, obscure and incongruous, and that the amount demanded has no legal and factual foundation, raising justified doubts about the quantification of the taxable event.

dd) It understands that AT induced it into error "when it granted the exemption from IMT payment prior to the execution of the public deed in question" and now proceeds to assess the tax, given the non-existence of general guidelines from AT on the matter and which, in accordance with n.º 4 of article 68ºA of the LGT, imposed their publication, bearing in mind that the grounds invoked for the issuance of the assessment are taken from a jurisprudence-establishing ruling, which it considers to be an essential formality relating to the formation of administrative will.

ee) It argues that, given the non-existence of a previously published general guideline from AT on this matter, there is an omission of a legal formality and a violation of the principle of cooperation and good faith.

ff) Lastly, it states that the revocation of the exemption could only be implemented within 1 year after it was granted, being an act creating rights, (article 141º n.º 1 of the CPA and article 58º of the CPTA), since the exemption was granted before the deed dated 30.03.2010 and the revocation was communicated on 10.04.2015.

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

hh) It concludes by requesting the declaration of nullity of the IMT and interest assessment with the legal consequences.

SUMMARY OF THE RESPONDENT'S POSITION

ii) The Respondent argues that, according to a document it submitted to the file, citing the operating permit nº ... 2009 of 12.06.2009 issued by the Municipal Chamber of Portalegre (9th page of Annex I of the PA), the enterprise "began its operation on 12 June 2009", so at the date of acquisition of the property by the Claimant (30.03.2010) the tourist enterprise was already installed and in operation.

jj) Disagreeing with the reading that the Claimant makes of the scope of application of the IMT exempting rule, it invokes in support of its view a decision of the STA (of 23.01.2013 – process 0968/12) where it is concluded, as to the date of acquisition, that "... it is irrelevant whether this occurred before or after the enterprise was already installed and in operation", rather, what is relevant for purposes of the said exemption is whether the acquisition of the property was intended for the installation of a tourist enterprise or, instead, for its operation.

kk) Since what is at issue in this case is to determine the meaning and scope of the rule contained in article 20º, n.º 1 of Decree-Law nº 423/83, of 05/12, regarding the phrase "acquisitions of real properties or autonomous fractions intended for the installation of enterprises qualified as of tourist utility", it concludes that the legislator only wished to cover with this rule acquisitions intended for the "installation" of enterprises, as is clear from the literal element.

ll) And it argues in defense of this understanding, once again, the text of the STA ruling of 23.01.2013 rendered in the process indicated above, as to the definition of the term "installation" (in contrast to "operation" and "exploitation"), which means "the operations and procedures tending toward the construction/creation of tourist enterprises".

mm) In this case, since the acquisition occurred at a time after the issuance of the operating permit, it concludes that it was intended for commercial operation, since necessarily the "installation" phase had been surpassed.

nn) And that, even if that were not so – again citing the text of the STA ruling indicated above - "any sales of accommodation units carried out during the construction/installation phase of the enterprise already form part of its operation."

oo) Disagreeing with the Claimant as to the invoked nullity of "lack of authority", it states that what matters here is to determine whether the prerequisites of the tax benefit of n.º 1 of article 20 of Decree-Law nº 423/83 of 05/12 are met or not, since the extinguishment of tax benefits implies the automatic restoration of taxation according to article 14º-1 of the Tax Benefits Statute (EBF), concluding that the assessment does not suffer from this nullity.

pp) It pronounces in the same way regarding the non-verification of "lack of reasoning", since the Claimant, without difficulty, understanding the factual and legal reasons that led to the issuance of the impugned act, chose to activate the jurisdictional remedy available here.

qq) It disagrees with the invoked violation of the "principle of security and legal certainty", both because the Claimant had available the mechanism of binding information prior to the execution of the deed, and because the Notary and the Registrar, pursuant to article 54º of the IMT Code (CIMT), act only in a supervisory function, not generating a legally protected expectation based on their interpretations of tax law, as they do not form part of the tax administration.

rr) It argues that the right to assess IMT has not expired, either because it was the Claimant who prompted the issuance of payment notices for the tax (which should be understood as recognition of the tax debt), or because the deadline for the right to assess is 8 years (article 45º-1 of the General Tax Law – LGT – and n.º 1 of article 35º of the CIMT), a deadline that has not elapsed, or still because, pursuant to article 33º of Decree-Law 39/2008, of 07.03, the tourist utility would have ceased by the closure of the enterprise.

ss) Regarding the alleged illegal revocation of an administrative act that granted the benefit, it states that the benefit in question is automatic and flows directly from law, without requiring an act of recognition that would generate an administrative act, and therefore cannot be set aside by a revocatory act of an annulling nature, the assessment act not constituting a revocation of a valid act.

tt) As to the alleged omission of the legal formality of failure to issue a general guideline in accordance with the STA decisions invoked for the assessment and the violation of the principles of cooperation and good faith, it clarifies that AT is subject to the principle of legality, and therefore the application of law cannot depend on the issuance of a general guideline, and it is certain that, in this case, it was the Claimant who prompted the issuance of payment notices for the tax.

uu) Finally, it invokes several identical cases that proceeded at CAAD, where the legality of the impugned acts was decided, arguing for the dismissal of the request for pronouncement.

II - QUESTIONS FOR THE TRIBUNAL TO RESOLVE

Principal Question

The principal question at issue in this case consists of determining the scope of application of the exemption provided for in article 20.º, n.º 1, of Decree-Law n.º 423/83, of 5 December, which requires determining the meaning and scope of the rule provided therein regarding the phrase "acquisitions of real properties or autonomous fractions intended for the installation of enterprises qualified as of tourist utility."

Other Questions Relating to the Impugned Act(s)

1.  To consider the invoked nullity of "lack of authority" for issuance of the assessment act, constituting the creation of a new tax.
   

2.  To consider the alleged lack of factual and legal reasoning or insufficiency, relative to the impugned act.
   

3.  To consider the alleged violation of the principles of prohibition of retroactivity and of security and legal certainty, given the allegation that AT "recognized the IMT exemption prior to the execution of the public deed", with the Claimant having presented in the public deed documents confirming its application, which also received validation from the Notary responsible.
   

4.  To consider the alleged violation of the principles of cooperation and good faith by non-existence of general guidelines from AT on the matter.
   

5.  To consider the invoked illegality of the revocation of the IMT exemption benefit, since the assessment at issue occurred more than one year after the acquisition of the property.
   

III. PROVEN AND UNPROVEN FACTS AND REASONING

With relevance to the decision to be adopted, these are the facts considered proven, indicating the respective documents (proof by documents), as reasoning.

Proven Facts

1.             To the tourist enterprise named "B..." was granted "tourist utility" definitively for a period of 7 years, until 12 June 2016, by order nº .../2010 of the State Secretary for Tourism dated 09.03.2010, published in the Official Journal, 2nd Series, nº..., of 13 April 2010 - as per pages 5 and 6 of Annex 1 of the PA and page 1 of Annex 3 of the PA, article 4º of the request for pronouncement and n.º 3-A of AT's response.
   

2.             The tourist enterprise named "B..." began its operation on 12 June 2009, according to operating permit nº .../2009, of 12 June 2009, issued by the Municipal Chamber of Portalegre – as per page 9 of Annex I of the PA - contents of service information nº 2010/…/... of 11.02.2010 from Tourism of Portugal.
   

3.             By deed of dation in payment dated 30.03.2010 the Claimant acquired an urban property comprising a building intended for services, located at Rua ... nº..., described in the Land Registry Office under nº ... and registered under article ...º (current article...), in the parish of ... and ... and Municipality of Portalegre, corresponding to the tourist enterprise "B..." – as per document nº 1 attached with the request for pronouncement, pages 2 to 11 of Annex 3 of the PA, article 1º of the request for pronouncement and n.º 3-D of the response.
   

4.             In the deed referred to in the preceding paragraph, regarding the payment of municipal property transfer tax (IMT), the following appears: "declaration for assessment of IMT and the respective collection document number..., in the amount of zero euros" - as per page 8 of document nº 1 attached with the request for pronouncement and page 10 of Annex 3 of the PA.
   

5.             In the said deed, it further appears that the parties executing it:
   

"declare under their full responsibility for tax purposes that the said property is intended for the installation of a tourist enterprise and that its qualification as an enterprise of tourist utility has already been requested for purposes of the Decree - law n. º 423/83 of 5. 12" (see Doc. 1, attached below)." - as per page 7 of document nº 1 attached with the request for pronouncement.

1.             Finally, in the same deed it is expressed that:
   

"That, immediately following this deed, the property will be given in financial lease to the represented party of the first executing parties through a contract to be executed by private document." - as per page 7 of document nº 1 attached with the request for pronouncement.

1.             Prior to the execution of the deed, the Claimant submitted on 26.03.2010, at the Finance Service of …, the IMT assessment declaration of Model 1, indicating in section V, field 48, benefit 33, and was issued by the Finance Service, as taxpayer, the document..., with 0.00 euros of IMT assessed – as per page 2 of Annex I to the PA, and page 8 of document nº 1 attached with the request for pronouncement and page 10 of Annex 3 of the PA.
   

2.             On 27 March 2015, the Claimant sent a communication via email to the Finance Service of … with the following content: "As owner of the property referred to above, acquired on 30.03.2010 and given that the period of the legally provided IMT exemption has already expired, we hereby request the issuance and sending (via the same means) of the payment notices for that tax, as well as any penalties, so that we may proceed with the consequent assessment…" – as per pages 1 and 2 of Annex 4 of the PA and n.º 5 –F of the response.
   

3.             The Claimant was notified on 10.04.2015 of the assessment with identification document..., issued following the request referred to in the preceding section, relating to IMT in the total amount of 475,843.45 euros, of which 396,500.00 euros of IMT and 79,343.45 euros of interest, and to proceed with the respective payment – article 8º of the request for pronouncement.
   

4.         On 13.04.2015 the Claimant made payment of the amount referred to in the preceding section – article 9º of the request for pronouncement, n.º 3-G of the response and document nº 3 attached to the request for pronouncement.
   

5.                     On 09-07-2015, the Claimant filed with CAAD the present request for pronouncement – entry registration in the SGP of the request for pronouncement.
   

Unproven Facts

There is no other factuality alleged that was not considered proven and that is relevant to the composition of the dispute.

It is noted that it was not proven that the acquisition of the property in question was intended for the installation of the tourist enterprise, that it was intended to allow the continuity of the process of installation of the enterprise, or that the acquisition was made on the assumption that that specific operation would benefit from IMT exemption, inasmuch as no proof was brought to the proceedings in that regard, and it is certain that, as to the first of these circumstances, it is precisely the contrary that is demonstrated, namely, that the acquisition of the property in question was intended to be the subject of financial lease to the transferor, which is not contradicted, obviously, by the declaration to the contrary made by the parties in the public deed of dation in payment, which, in addition to being polysemous, binds only the declarants. It should be noted, moreover, that the Claimant itself ends up alleging that "the acquisition of the property was intended to allow the continuity of the process of installation of the enterprise of tourist utility" (emphasis ours) and that it, admittedly, was not intended to see installed, by the Claimant or on its account, a tourist enterprise, but to be given in financial lease.

The fact that the parties executing the deed of dation in payment placed in the deed that the property was intended "for the installation of a tourist enterprise" does not bind AT, it being certain that in the same declaration the cessation of tourist utility is provided with subsequent additional assessment of taxes.

IV. ASSESSMENT OF THE QUESTIONS FOR THE TAC TO RESOLVE

As to the Principal Question

As to this matter, we will closely follow what was expressed in the decision adopted in CAAD Case nº 730/2014-T, where an identical question was decided.

The principal question in the present arbitration, regarding which the Tribunal is called to pronounce, is to determine whether the illegality of the act of additional assessment of IMT, document identification ..., issued following the express request of the Claimant, in the total amount of 475,843.45 euros, of which 396,500.00 euros of IMT and 79,343.45 euros of interest, should be declared, with reference to the acquisition by the Claimant of the urban property comprising a building intended for services, located at Rua ... nº..., described in the Land Registry Office under nº ... and registered under article ...º (current article ...º), in the parish of ... and ... and Municipality of Portalegre, corresponding to the tourist enterprise "B...".

That is, it falls to the Tribunal to determine the scope of application of the exemptions provided for in article 20.º, n.º 1, of Decree-Law n.º 423/83, of 5 December, which is reduced to determining the meaning and scope of the rule provided therein regarding the phrase "acquisitions of real properties or autonomous fractions intended for the installation of enterprises qualified as of tourist utility."

The concept of tourist utility is contained in Decree-Law n.º 423/83, of 5 December, which defines it as "the qualification attributed to enterprises of a tourist character that satisfy the principles and requirements defined in this act and its regulatory provisions". Article 3.º, n.º 1, of the said act provides that tourist utility may be attributed to various enterprises, being the same attributed, pursuant to article 2.º, by order of the Government member with responsibility for the tourism sector, under the proposal of the Director-General of Tourism, with the opinion of the Tourism Utility Commission. Article 4.º defines the prerequisites that should be evaluated in order to attribute tourist utility, and article 5.º defines the conditions that enterprises must meet in order to benefit from tourist utility.

Article 16.º of Decree-Law n.º 423/83 establishes the exemptions applicable based on the attribution of tourist utility, establishing that "companies owning and operating enterprises to which tourist utility has been attributed shall enjoy, regarding the ownership and operation thereof, the following tax benefits, under the terms established in this act (…)".

According to article 20.º, n.º 1, of the same act, acquisitions of real properties or autonomous fractions intended for the installation of enterprises qualified as of tourist utility are exempt from transfer tax and inheritance and gift tax, with stamp tax being reduced to one-fifth, provided that such qualification is attributed even provisionally, as long as it remains valid and the deadline set for the opening to the public of the enterprise is observed.

Pursuant to n.º 2 of article 28.º of Decree-Law n.º 287/2003, of 12 November (which reformed taxation of heritage), "All legal texts that mention Transfer Tax Code and the Code of Inheritance and Gift Tax, municipal transfer tax (…) shall be considered to refer to the Code of Municipal Property Transfer Tax (CIMT), (…), to the municipal property transfer tax (IMT) (…), respectively." Thus, the exemption in question has since referred to IMT.

In the present case, AT understands that, since the tourist utility to which article 20.º, n.º 1, refers was requested and attributed to the company that constructed the enterprise, the taxpayer who acquired the property from the said company acquired an enterprise already constructed and installed, and therefore could not benefit from the said IMT exemption. In defense of its thesis, AT invokes what was decided in the Ruling of the Supreme Administrative Court dated 23.01.2013[2], in the course of case n.º 968/12, in which it can be read that "not being at issue the acquisition of real properties or autonomous fractions intended for the construction/installation of tourist enterprises, but rather the acquisition of accommodation units by final consumers, even though because they are integrated in the enterprise in question they are allocated to tourist operation, the same cannot benefit from the exemptions enshrined in article 20.º, n.º 1, of Decree-Law n.º 423/83, of 5 December".

In the reasoning of this jurisprudence-establishing ruling the following can also be read:

"The provision thus establishes, in this manner, exemption from transfer tax and stamp tax (reduced to one-fifth), in acquisitions of real properties or autonomous fractions intended for the "installation" of enterprises qualified as of tourist utility.

Thus, the question that arises is to know which acquisitions should benefit from the IMT and Stamp Tax exemptions enshrined therein: acquisitions of real properties or autonomous fractions by developers with a view to constructing and installing the tourist enterprises, or acquisitions of autonomous fractions (accommodation units) belonging to or integrated into enterprises already constructed and installed, with a view to their operation?

The answer to this question refers us to the problem of knowing what should be understood by "installation" of tourist enterprises.

(…)

1. Beginning with the literal wording of art. 20º, nº 1, of Decree-Law nº 423/83, it is important to emphasize that the legislator clearly states that only acquisitions of real properties or autonomous fractions intended for the installation of enterprises qualified as of tourist utility are exempt from transfer tax and stamp tax.

This means that it is not a subjective exemption intended to benefit companies, whether owners or operators of the enterprises, but rather objective, since it aims to benefit the activity of installation, and may only request and benefit from the exemption those companies dedicated to "installing" tourist enterprises and not also those that intend to dedicate themselves to the activity of operating the same.

In fact, the legislator is very clear when it intends to benefit companies that own and or operate the enterprises. This is what happens when in art. 16º of the same act it states that companies that own and or operate the enterprises shall enjoy, regarding the ownership and operation thereof, the benefits indicated in subsections a) to c) of n.º 1 of the provision. Or when in n.º 2 of art. 20º of Decree-Law nº 423/83 it expands the exemption established in n.º 1 of the provision in "transmission in favor of the operating company, in the case of the owner being a financial leasing company and the transmission takes place under and in accordance with the leasing contract terms".

What has just been set forth serves to demonstrate that, by contrast with what was stated, in the case of the exemption in n.º 1 of art. 20º of Decree-Law nº 423/83, it offers no doubt that the legislator only wished to cover acquisitions intended for the "installation" of enterprises.

As Decree-Law nº 423/83 does not contain a definition of the concept of "installation", article 11.º, n.º 2, of the LGT directs us to rely on the technical legal meaning provided by the legal regime of tourist enterprises.

(…)

Thus, in art. 9º of Decree-Law nº 167/97, under the heading "Installation", it can be read that "For purposes of this act, the installation of tourist enterprises is considered to be the licensing of the construction and or use of buildings intended for the operation of those enterprises."

In turn, art. 9º of Decree-Law nº 55/2002 defines installation as follows: "(…) The installation of tourist enterprises is considered to be the licensing process, or authorization for the performance of urban development operations related to the construction of buildings or their fractions intended for the operation of those enterprises".

(…)

Another fact that is important to emphasize and which is extracted from the mentioned acts is that the operations that form part of the concept of "installation" are not confused with those that correspond to the concepts of "operation" and "exploitation".

(…)

Finally, the most recent act, Decree-Law nº 39/2008, of 7 March (JusNet 474/2008), which established the new legal regime for the installation, operation and functioning of tourist enterprises, "proceeding with the repeal of the various acts that currently regulate this matter and gathering in a single decree-law the provisions common to all enterprises", also does not contain a notion of "installation", but clearly distinguishes between the procedure concerning the installation of tourist enterprises (arts. 5º and 6º and Chapter IV) and the operation and exploitation thereof (Chapter VII).

In particular, art. 5º, under the heading "General installation requirements" (The procedure for the installation of tourist enterprises is subject to a common regime, that is, a set of common requirements, as results from this art. 5º, nº 1, and art. 23º of Decree-Law nº 39/2008, therefore, in the installation of tourist enterprises there is highlighted a common procedural regime that is the one defined in the Legal Regime for Urbanization and Building, with the particularities or specificities that result from Decree-Law nº 39/2008. For a detailed analysis of the general requirements of the instruction of prior information requests, licensing and submission of prior notification and of the specific requirements for the installation of tourist enterprises, see LICÍNIO LOPES MARTINS, "The procedure for the installation of tourist enterprises", Tourist Enterprises, CEDOUA/FDUC, Almedina, 2010, pp.121 et seq.), establishes:

"1- The installation of tourist enterprises that involve the performance of urban development operations as defined in the legal regime of urbanization and building must comply with the norms contained in that regime, as well as the technical construction norms applicable to buildings in general, namely regarding fire safety, health, hygiene, noise and energy efficiency, without prejudice to the provisions of this decree-law and its respective regulation.

2- The location chosen for the installation of tourist enterprises must necessarily take into account the legally defined location restrictions, with a view to protecting the safety of persons and property against possible natural and technological risks".

(...)".

The technical legal meaning that is extracted from the legislation is that the concept of installation comprises all operations and procedures ranging from the request for licensing or prior notice of urban development operations, through the opinions and approvals of the various competent official entities, request for authorization or communication of use for tourist purposes, and obtaining the respective permit (art. 30º) or certificate of opening to the public (art. 32º). In this sequence, n.º 2 of art. 12º of Decree-Law nº 423/83 states that "the date of opening or reopening to the public is that on which the enterprise was authorized to operate by the competent authority". The date of communication of the opening and operation certificate being the relevant one to mark the beginning of the validity period of the tourist utility status of the tourist enterprise in question, as results in the case at issue (see the order nº …/2011).

In other words, "installation" emerges as a procedure that comprises the legal acts and procedures tending toward licensing (in a broad sense, including prior communications or authorizations, as the case may be) of the urban development operations necessary for the construction of a tourist enterprise, as well as the obtaining of the titles that make it suitable to operate and be exploited for tourist purposes.

After being constructed and once the promoters of the investment have obtained the necessary licenses to make the enterprise suitable for the exercise of tourist activity, each tourist enterprise "must be operated by a single entity, responsible for its full operation and level of service and for compliance with applicable legal and regulatory provisions" (n.º 1 of art. 44º of Decree-Law nº 39/2008), such entity being designated by the holder of the respective permit for authorization of use for tourist purposes (n.º 2 of art. 44º), that is, by the promoter (see Chapter VII and arts. 41º et seq. of Decree-Law nº 39/2008, which establishes the rules relating to operation and functioning).

And even though the accommodation units are occupied by their respective owners, it falls to the operating entity to assume the continued operation thereof, and must maintain them permanently in a state of tourist operation (art. 45º of Decree-Law nº 39/2008).

This distinction between the concepts of "installation", on the one hand, and "operation" and "exploitation", on the other, is very clear in the preamble itself of Decree-Law nº 39/2008, where the concerns and innovations regarding aspects related to the licensing of enterprises can be read, in the direction of its simplification. In the same direction, DULCE LOPES (See "Legal aspects of the installation of tourist enterprises", I Luso-Spanish Seminars on Urban Planning, Almedina, Coimbra, 2009, pp. 225 et seq., in particular, p. 227.), in characterizing the procedure for the installation of tourist enterprises, under Decree-Law nº 39/2008 and complementary legislation, expressly states that with the mentioned act it was intended "(…) an adjustment of the procedure for the installation of tourist enterprises to the requirements of simplification and procedural debureaucratization that animates the legislative package of the Program for Administrative and Legislative Simplification (SIMPLEX)". And the said Author continues by saying that "In these terms, it falls to the municipality to license or admit prior communications of the operations necessary for the installation of hotel establishments, tourist villages, tourist apartments and tourist complexes, and must, for this purpose, request the opinion of Tourism of Portugal I.P. on the architecture and location of tourist enterprises not preceded by a detailed plan".

In summary, from reading the regime contained in arts. 5º to 6º and 23º to 40º of Decree-Law nº 39/2008, it is verified that the concept of "installation" has nothing to do with "operation" and "exploitation" and that in it there fit only, as the Public Tax Administration states, the acts, operations and procedures tending toward the construction/creation of tourist enterprises.

(…)

It thus becomes clear that any sales of accommodation units carried out during the construction/installation phase of the enterprise already form part of its operation. Two distinct procedures are thus highlighted, although they may occur simultaneously: one relating to the practice of the operations necessary to install the enterprise; another, relating to the operations necessary to put it in operation and to exploit it, with the sale of the projected or constructed units necessarily forming part of the second moment.

(…)

What has just been set forth leads us to conclude that when the legislator, in n.º 1 of art. 20º, uses the expression acquisitions of real properties or autonomous fractions intended for "installation" (Whether new or existing, but that are subject to remodeling, improvement or re-equipment, or that increase its capacity (art. 5º of Decree-Law nº 423/83), this concept cannot but be understood as referring precisely to the acquisition of real properties (or autonomous fractions) for construction (when it comes to new enterprises (The law also covers, as was stated, the acquisition of mere autonomous fractions with a view to remodeling/installation of tourist enterprises.)) of tourist enterprises, after the respective urban development operations have been duly licensed, with a view to benefiting companies dedicated to the activity of promotion/creation thereof.

(…)

This same conclusion is that which results from reading what was stated by the Working Group created to reassess the tax benefits that, regarding tax benefits to tourist utility in IMT, Stamp Tax and IMI, recommend their abolition, because, among other reasons, "the promoters of investments in the tourism sector maintain, in addition to financial support framed within the policies of the Portuguese State and the European Union, access to general investment incentives and interiorality benefits. Moreover, by minimizing the impact of the measure in the IRC field, directly or through the increase in reinstatements and amortizations, the costs resulting from IMT and IMI on investments that remain subject to these taxes" (See Reassessment of Tax Benefits, Tax Science and Technology Notebooks, nº 198, p.294.).

It is clear from the considerations of the Working Group that the legislator intended to promote tourist activity by providing exemption/reduction of payment of Transfer Tax/Stamp Tax, for promoters who intend to construct/create establishments (Many promoters before acquiring the properties where the tourist enterprise will in the future be installed, elaborate the project and apply for the attribution of tourist utility in advance (art. 7º of Decree-Law nº 423/83), which will allow them to benefit from the IMT exemption and reduction of Stamp Tax regarding the acquisition of the property. On the other hand, promoters who pay tax on the acquisition of properties intended for the installation of tourist establishments may, subsequently, request reimbursement when tourist utility is recognized to them.) (or readapt and remodel existing fractions) and not when it is the mere acquisition of fractions (or accommodation units) integrated in the enterprises and intended for operation, even though they are acquired on a date prior to the installation/licensing of the enterprise itself (As we have seen, nothing in fact prevents the investment promoter from beginning to sell the future fractions or units even before the construction of the enterprise and its installation.)

(…)

In truth, when individuals acquire fractions, they do so, as is obvious, as consumers of a tourist product that was placed on the market by the promoter with a view to operation, for, as we have seen, the execution of promise of sale and purchase contracts is accompanied by the execution of an operation contract. The objective that drives individuals is the realization of their own investment, and they may still opt to be users of the enterprise or cede the operation, participating in its results (see n.º 4 of art. 45º of Decree-Law nº 39/2008). For although it is considered that the fractions become allocated to operation, nothing prevents them from being occupied exclusively by their respective owners and for an indefinite time, as is clearly derived from legal provisions, such as those contained in arts. 45º, n.º 1, of Decree-Law nº 39/2008, when it expressly states "(…) the operating entity must assume the continued operation of all "(…)" accommodation units "(…) even though occupied by their respective owners", and in n.º 4 of the same provision, when it refers to the conditions of use of accommodation units by their respective owners. In the words of DULCE LOPES (See "The Realization of Enterprises"...cited, p. 170.), the act thus seems to "embrace the concept of residential tourism, since it expressly admits that the owners of accommodation units may occupy them or execute contracts concerning them, provided they do not compromise their tourist use, enjoy the mandatory services of the enterprise and pay the recurring charge to which they are bound.

In summary, the promoters of the enterprises are solely responsible for the real estate investment, with the risk of the same resting with them, as well as for obtaining the licenses necessary to make them suitable for operation and exploitation.

It thus appears that the argument of the challenged party in the sense that the benefit enshrined in n.º 1 of art. 20º of Decree-Law nº 423/83 is aimed at tourist operation and that the beneficiaries are the acquirers of fractions or accommodation units, has no bearing whatsoever, neither in the letter nor in the reason for the provision.

The benefit only has justification regarding those who proceed with the installation of the enterprise and place it on the market and not in relation to all who use and exploit it, even through the purchase of its units.

We cannot thus but conclude that the claimant is correct when defending that "(…) The legislator intended to promote this sector of activity, providing exemption/reduction of payment of Transfer Tax/Stamp Tax, under certain conditions, to those who will create tourist establishments, and not to those who merely acquire fractions belonging to enterprises already installed", and that this understanding or interpretation is that which flows "from the historical, rational/teleological, but also literal element of the legal norms at issue"."

In this case, although what is not at issue is the acquisition of autonomous fractions of the enterprise, but rather its acquisition in its entirety, it appears to us appropriate to apply what results from the STA ruling that has just been cited in the parts that are deemed most relevant.

In fact, it results from the established facts that the tourist enterprise began its operation on 12 June 2009, according to operating permit nº .../2009, of 12 June 2009, issued by the Municipal Chamber of Portalegre.

On the other hand, the Claimant failed to prove, limiting itself to alleging, that the acquisition of the property in question was intended for the installation of the tourist enterprise, that it aimed to allow the continuity of the process of installation of the enterprise, and that the acquisition was made on the assumption that that specific operation would benefit from IMT exemption.

As has already been stated, the fact that the parties executing the deed of dation in payment expressed in the deed that the property was intended "for the installation of a tourist enterprise" binds only those same parties, it being certain that in the same declaration the cessation of tourist utility is provided with subsequent additional assessment of taxes.

Now the acquisition of the real property occurred by deed of dation in payment dated 30.03.2010, thus on a date subsequent to the beginning of its operation on 12 June 2009.

Therefore we are dealing with an operation subsequent to the "installation" of the enterprise which will have to do with the "operation" or "functioning", all the more so because in the deed of dation it is expressed that immediately after the property was given in financial lease to the very sellers of the property that comprises it, suggesting that it was an operation tending to obtain means of financing for the subsequent phases (operation or functioning). It thus becomes obvious, in view of the facts given as proven and the deed of dation itself, that the property in question was not acquired for the Claimant to install a tourist enterprise thereon, but to give it in financial lease (that is, the operation of the property by the Claimant was intended to be, and was, financial, and not tourist).

Finally, notwithstanding the Claimant's assertion that "The quantification of the taxable event under analysis raises justified doubts, and therefore the impugned act should always be annulled, ex vi of arts. 99.º/1/a) and 100º of the CPPT.", the fact is that it does not specify, in any manner, what the doubts are and, much less, their respective foundation.

Therefore, the request for pronouncement can only be dismissed: the IMT exemption applied only to the promoter of the enterprise in the installation phase which was already complete on the date of execution of the deed of dation, while the Claimant aimed for the financial operation, and not tourist, of the property.

Nullity of "Lack of Authority" for Issuance of the Assessment Act Constituting the Creation of a New Tax

As has been stated, the Claimant failed to prove that the tourist enterprise was still in the installation phase, nor did it adduce facts susceptible to additional proof in that regard.

The Claimant argues that "the assessment act sub judice constitutes the creation of a true tax or special contribution not permitted by law", because "in this case the verification of the prerequisites upon which, according to the law, the taxability of the tax in question depends was not proven".

It is not correct – manifestly. In fact, so clear is "the verification of the prerequisites upon which, according to the law, the taxability of the tax in question depends", that the Claimant invokes a tax benefit to try to exempt itself from the respective payment. In fact, there will be no doubt that tax benefits only operate if, and as long as, the "prerequisites upon which, according to the law, the taxability of the tax depends" are met.

What is at issue here, then, is to determine whether the tax benefit of IMT that was enjoyed, pursuant to what appears in the deed, has its prerequisites met, on the date of its occurrence. And as has already been stated above, the prerequisites are not met, since, on the date of acquisition of the real property that comprises the enterprise, it was already complete and, in any case, the Claimant acquired it with a view to its financial operation, and not tourist. Moreover, it had already begun operation on 12 June 2009, according to operating permit nº .../2009, of 12 June 2009, issued by the Municipal Chamber of …

It is understood, by the foregoing, that the invoked nullity should be judged unfounded.

Lack of Reasoning

In this regard, after examining the facts given as proven, it is verified that the assessment was requested by the Claimant on 27 March 2015, having sent a communication via email to the Finance Service of … with the following content: "As owner of the property referred to above, acquired on 30.03.2010 and given that the period of the legally provided IMT exemption has already expired, we hereby request the issuance and sending (via the same means) of the payment notices for that tax, as well as any penalties, so that we may proceed with the consequent assessment…"

The assessment document (document nº 2 attached with the request for pronouncement) states that it is an additional assessment, indicates the tax, the taxpayer, the taxable event, the taxable asset value, the rate, the IMT collection and the interest (as well as the period for which it was computed) and besides identifying the property, further expresses:

1.  Payment notices requested by the taxpayer by email dated 27.03.2015;
   

2.  Global value of the act or contract: 6,100,000.00;
   

3.  Additional assessment of IMT, made by registration .../2010 for the acquisition of an urban property, due to the fact that the benefit granted therein, tourist utility, is not met.
   

In this context, it should be concluded that the duty of reasoning the assessment was fully met.

In this way, and by the foregoing, it is understood that the invoked defect of lack of reasoning should be judged unfounded.

Violation of the Principles of Prohibition of Retroactivity, Security, Legal Certainty, Cooperation and Good Faith

The Claimant understands that, given the allegation that AT "recognized the IMT exemption prior to the execution of the public deed", and because it presented these documents for the execution of the public deed, confirming its application, which also received validation from the Notary, the assessment violates the constitutional principles of prohibition of retroactivity and security and legal certainty.

As to retroactivity, it should be noted that what is at issue is an additional assessment, that is, the first zero-rate assessment was considered the original. The Tribunal does not see where any retroactive application of the law can occur in this circumstance, since the right to assess IMT lapses only after 8 years (article 45º-1 of the LGT and 35º-1 of the CIMT), and the right to proceed with additional assessments, resulting from factual or legal error (as is the case) may be exercised within 4 years (see article 31.º, n.º 2 and 3 of the CIMT)[1].

As to the principles of security and legal certainty, it should be noted once again that the assessment at issue was prompted by the Claimant, and therefore it cannot allege that it did not expect it. Moreover, since the power to assess and to make additional assessments is regulated, its proper exercise should form part of the content of the principles of security and legal certainty, which inform the legal order that enshrines them, constituting, as such, a realization, furthermore, of such principles, and therefore illegality resulting from the violation of norms that regulate them (the said powers to assess and make additional assessments) will constitute its own illegality – to be alleged and demonstrated specifically – and cannot be generically raised or replaced through the alleged violation of the principles embodied in such norms.

Also, the question of the withdrawal of the tax benefit that appears in the first assessment has another legal dimension, which is that of the revocation or not of the tax benefit in accordance with the legal regime in force. It is a regime legally provided in law that safeguards all constitutional principles.

The same applies to the principles of cooperation and good faith. The fact that there may or may not be general guidelines from AT on a particular topic does not mean that any impediment to the application of tax law can result therefrom[2].

It is understood, by the foregoing, that the invoked defects of violation of the principles of prohibition of retroactivity, security, legal certainty, cooperation and good faith should be judged unfounded.

Illegality of the Revocation of the Tax Benefit of IMT Exemption

Finally, the Claimant alleges that "the revocation of the exemption could only be implemented within a period of 1 year after it was granted, being an act creating rights, by application of the combined terms of arts. 141º, n.º 1, of the CPA and 58.º of the CPTA.", since, in its understanding, "the exemption was granted prior to the deed executed on 30 March 2010 and its revocation was communicated on 10 April 2015, following the issuance of the assessment by the Finance Service of ….", and therefore "the revocation of such administrative act was implemented beyond the 1-year period in which it was legally possible, pursuant to articles 136.º and 141.º of the CPA, applicable ex vi art. 2.º, subsection c), of the LGT and art. 2.º, subsection d), of the CPPT.".

With due respect, it is also understood that the Claimant is not correct here.

In fact, it is not apparent that any act of recognition of the tax benefit in question was performed for the Claimant, nor that there was any procedure tending toward that, nor is it provided, equally and barring better opinion, in the legal regime of the tax benefit in question such procedures and acts.

The assessment at issue is issued following the declaration by the Claimant that the property in question is intended for the use that guarantees the sought exemption, which is of automatic recognition, as was expressly stated in the Ruling of the STA dated 16-12-2009, rendered in case 0936/09[3], where it can be read that: "in the cases referred to in art. 20º, nº 1, of the same act - exemption from transfer tax and inheritance and gift tax and reduction of stamp tax - the tax benefits provided therein apply automatically, as long as the requirements established in that same act are met".

But even if this is not the case, and it is considered that the Claimant was actually granted a tax benefit, the truth is that in this case there would always have been a waiver of the benefit as a result of the action of the Claimant upon requesting the payment notices for the tax, pursuant to n.º 8 of article 14º of the EBF, since we would not be, in that case, dealing with a benefit, whether automatic or depending on official recognition, but rather one dependent on a request (Model 1 form of IMT/request where the exemption is invoked) and a decision by AT (issuance of the DUC at zero rate with recognition of the benefit).

V. RULING

For the reasons set forth above, the request of the Claimant is judged unfounded, and the Respondent is absolved of the request.

Case Value: in accordance with the provisions of article 3.º, n.º 2, of the Regulation of Costs in Tax Arbitration Proceedings (and subsection a) of n.º 1 of article 97ºA of the CPPT), the case is assigned a value of 475,843.45 euros.

Costs: pursuant to the provisions of article 22.º, n.º 4, of RJAT, the costs are set at € 7,650.00 euros, according to Table I attached to the Regulation of Costs in Tax Arbitration Proceedings, at the charge of the Claimant.

Notify.

Lisbon, 13 January 2016

Collective Arbitral Tribunal,

José Pedro Carvalho (President)

José Ramos Alexandre

Dissenting Opinion

I voted in favor of the arbitral decision, in the sense of dismissal of the request, with the following clarification:

The tax exemption at issue in this case is contained in legislation outside the IMT Code (subsection d) of n.º 8 of article 10º of the IMT Code).

With the amendment of subsection d) of n.º 8 of article 10º of the CIMT, by article 97º of Law 64-A/2008, of 31.12, the exemption became dependent on automatic recognition, consisting in the requirement of submission of the Model 1 form of IMT, even in exemption situations (article 19º nos. 1 and 3 of the CIMT), with the content defined in article 20º of the CIMT and with assessment being the responsibility of the Finance Service where it is submitted (subsection a) of n.º 1 of article 21º of the CIMT).

Thus, it appears to us that, when in the Model 1 declaration of IMT (for assessment) the declarant invokes an exemption (as was the case), two procedures exist in contemporaneity: one of assessment of IMT (which may be for 0.00 euros if the entity competent to assess verifies that an act interrupting taxation occurs, in this case, an exemption), another of verification of the prerequisites of the tax benefit, and therefore, issued by the Finance Service, a single collection document (DUC) for 0.00 euros of IMT, such document contains, besides the assessment act, another act that concluded a procedure of recognition of the requested tax benefit, in the sense of the first part of subsection d) of n.º 1 of article 54º of the LGT and of article 65º of the CPPT.

Such an implicit act of recognition of the exemption (which in this case we verified was incorrectly granted) is, barring better opinion, constitutive of rights, and thus subject to the discipline of the latter part of n.º 4 of article 14º of the EBF and of n.º 1 of article 141º of the CPA (former) and of the Ruling of the STA of 15.05.2013 (case 0566/12, at www.dgsi.pt). And given that it was granted through a procedure provided generically in subsection d) of n.º 1 of article 54º of the LGT (first part), it should have been set aside by the inverse procedural mechanism (of extinguishment of the benefit) and autonomous, provided in the second part of this norm, since there does not exist procedural contemporaneity between the date of the act of additional assessment of IMT (in 2015) and the date of application of the exempting rule (in 2010) at the time of verification of the taxable event (the acquisition of the real property).

In fact, the exemption in question does not configure itself as being automatic (as for example is the case of the stamp tax exemption enshrined in article 6º of the Stamp Tax Code which operates ope legis pursuant to article 8º of the STC) but rather of automatic recognition, pursuant to the second part of the referred n.º 1 of article 5º of the EBF. Hence it is subject to a procedure of recognition where it is invoked and culminates in the issuance of an assessment document, with or without implicit recognition of the exemption, generating an act (administrative) pursuant to the first part of n.º 2 of article 5º of the EBF, if the assessment reflects the recognition of the tax benefit.

However, being the benefit in question, as it appears to us and results from the literal element of the law, of automatic recognition, since it was the Claimant who expressly requested the issuance of the collection document, including with penalties, and not being a benefit of an automatic nature or of official recognition, a waiver of the exemption occurred pursuant to n.º 8 of article 14º of the EBF, with the result that the necessary dismissal of the request for pronouncement follows.

Augusto Vieira

[1] A deadline which, in this case, appears to be exceeded. However, since the excess of the same was not alleged, in violation of the provisions of article 31.º/3 of the CIMT, this Tribunal is prevented from knowing such a question, as flows from the provisions of articles 22.º/1 and 28.º/1/c) of RJAT, and 615.º/1/d) of the Code of Civil Procedure.

[2] See, regarding how the circulars of the Tax Administration should be understood, the Rulings of the Constitutional Court n.º 583/2009 and n.º Ruling 42/2014, available at www.tribunalconstitucional.pt.

[3] Available at www.dgsi.pt.