Process: 439/2014-T

Date: March 2, 2015

Tax Type: IMT

Source: Original CAAD Decision

Summary

This arbitral decision addresses whether the acquisition of a fraction in a tourist undertaking qualifies for IMT exemption under Article 20(1) of Decree-Law 423/83. The claimant purchased half of a property fraction integrated in the 'C...' tourist complex in Loulé, assuming IMT exemption applied. The Tax Authority liquidated IMT at 6.5% on the taxable value (€255,319.00). The claimant argued that the exemption should extend beyond the initial promoter to acquirers of fractions who participate in 'installing' the tourist undertaking by financing the investment and committing the property to tourism exploitation. The claimant entered a tourism operation contract with the complex operator, ceding exclusive exploitation rights while maintaining ownership obligations including insurance, maintenance standards, and ensuring the property remained equipped for tourist use. Key arguments included: (1) the installation of a tourist undertaking is only complete when individual units are commercialized and equipped for operation; (2) acquirers under the plural ownership regime cannot give properties any destination other than tourism exploitation; (3) Article 20 complements the SISA deduction mechanism in former Article 39-A of CIMSISD; and (4) denying the exemption would contradict the legislative intent to promote tourism investment. The case raises fundamental questions about the scope of tax benefits for tourism real estate, distinguishing between promoter acquisitions for construction and investor acquisitions of operational tourist units.

Full Decision

ARBITRAL DECISION

Case No. 439/2014-T

ARBITRAL DECISION

Claimant: A…

Respondent: AT - Tax and Customs Authority

I – REPORT

1. REQUEST

A…, with tax identification number …, domiciled at … Street, Lisbon, filed, on 23-06-2014, pursuant to the provisions of paragraph a) of article 2, paragraph 1 and article 10 of Decree-Law No. 10/2011, of 20 January, which approves the Legal Framework for Tax Arbitration (RJAT), a petition for arbitral pronouncement, in which the Respondent is the AT - Tax and Customs Authority, with a view to the annulment of the liquidation act for Municipal Tax on Onerous Transfers of Real Property identified by number …, concerning the purchase of the urban property registered in the urban property register of the parish of ... under number .....

The Claimant alleges, in substance, the following:

a. ON THE SCOPE OF APPLICATION OF ARTICLE 20, PARAGRAPH 1 OF DECREE-LAW NO. 423/83

  • The liquidation at issue concerns the acquisition effected by the Claimant, on 28/12/2015, from company B... – …, S.A. of ½ of the fraction BK of the urban property registered in the urban property register of the parish of ... under number ..., intended for services, integrated in the tourist undertaking "C...", located at Av. ..., in ..., parish of ... in the municipality of Loulé;

  • The liquidation at issue resulted from the application of Municipal Tax on Onerous Transfers of Real Property (IMT) at the rate of 6.5% on ½ of the tax asset value of the property (1/2 * €510,638.00 = €255,319.00);

  • The Claimant effected the aforementioned acquisition under the assumption that it was covered by the IMT exemption provided for in article 20 of Decree-Law No. 423/83, of 5 December, with the deed of sale and purchase noting that the acquisition benefited from tax exemption;

  • Upon acquiring the property, the Claimant acted as promoter of the undertaking in which the fraction is integrated, actively contributing to the financing of the works in progress;

  • The Claimant effected the acquisition as an investment, with the intent to derive income from the property, having for that purpose executed with company D... – …, S.A., the entity operating the tourist complex designated "C...", a tourism operation contract, pursuant to which it ceded to that entity the exclusive right to operate the fraction;

  • Under that contract, the Claimant committed to deliver to D..., at the beginning of the contract's validity, the immovable property free, operational and with all conditions for tourist use, also assuming the obligation to ensure that the immovable would have furnishings, furniture and equipment of high standard, compatible with the needs of tourist exploitation, inherent to the qualification and classification of the immovable as a tourist property; it also undertook to establish and maintain in force, during the validity of the contract, insurance on the fraction, covering risks of collapse, fire, damages caused by earthquake, thunderstorms or other forces of nature, explosions and civil liability;

  • It further authorized D... to carry out necessary replacements and/or repairs of furniture, as well as general maintenance and elimination of defects;

  • By the same contract, the Claimant further assumed before D... the obligation to pay all contributions, taxes, levies or any charges, resulting from the contract or from ownership of the immovable, of, in the case of sale of the immovable, communicating the fact previously to D... and of ensuring that the purchaser would assume the obligations provided for in the contract;

  • In the same contract the parties further agreed that of the total income from the tourist operation of the immovable D... would receive 25%, with the remaining 75% paid quarterly to the Claimant, after deduction of costs relating to cleaning, maintenance and upkeep;

  • Through this contract, the Claimant renounced the free use of its property to benefit the tourist and commercial exploitation thereof;

  • Article 20 of Decree-Law 423/83 includes within its scope transfers made to the acquirers of the fractions, since if the objective of the law is to promote tourist activity, the benefit should cover not only the promoter but also the acquirers of the fractions, who are those who finance the investment;

  • The tax benefit in question aims to favor those who promote the process of installing tourist undertakings given the vital importance of this activity in the Portuguese economy;

  • The legal provision referred to grants IMT exemption to those who acquire a property to destine it to "the installation of a tourist undertaking." Now, the installation of a tourist real estate undertaking only ceases when, after the real estate complex is constructed and licensed, it proves apt to be allocated to the tourist exploitation activity with the quality required by the ministerial order that conferred upon it the status of tourist utility, which requires that the immovables have been endowed with the conditions for such, which in turn requires their commercialization. The promoter of the investment, in effect, does not carry out the complete installation of the immovables, with this remaining the charge of the acquirers thereof.

  • Thus, given that whoever acquires a lodging unit in a tourist undertaking established under the plural ownership regime provided for in RJIEFET[1] cannot give it another destination than tourist exploitation, being obliged to maintain it equipped and ready to be leased for that sole purpose, such acquisition does not represent a real estate transaction or an investment in a residential product, but an investment in the creation/installation of Portuguese tourist supply;

  • In sum, whoever acquires an immovable under the referred conditions, participates in its installation, in that this cannot be considered completely installed while the respective lodging units are not able to function and be operated due to lack of prior acquisition under that ownership regime;

  • It is thus not acceptable the thesis that only the promoter who acquires the immovable to construct an undertaking realizes a tourist investment;

  • In reality, those who normally realize the investment, already in the licensing and construction phase, are the acquirers of the fractions, through the payment of the deposit and reinforcements of the deposit by virtue of contracts of promise of sale and purchase executed with the promoter;

  • For all the above, the first acquisition of each autonomous fraction, as a lodging unit of the tourist undertaking "C...", integrates the process of installation of this undertaking, meeting the legal conditions to benefit from the Stamp Duty reduction provided for in article 20 of Decree-Law No. 423/83 of 5 December, given the tourist utility recognized for this undertaking;

b. AS REGARDS THE DEDUCTION OF SISA:

  • Article 39-A of the Code of Municipal Tax on Sisa and Tax on Succession and Donations (CIMSISD) established the possibility of deduction of the tax borne by promoters in the acquisition of the lands where the properties were built from the tax to be paid by the first transfer of the same or its fractions; This rule aimed to neutralize the burden incurred by real estate promoters with the acquisition of the land;

  • It would thus be manifestly illogical that, through the introduction of article 20 of Decree-Law No. 423/83, the legislator intended only to cover real estate promoters, who already had at their disposal a mechanism that allowed them to mitigate the weight of that tax burden;

  • In this manner, article 20 of Decree-Law No. 423/83 can only be understood as a complement to that provision of the CIMSISD, which means that its scope extends to the acquirers of the fractions who, in that way, participate in the installation of the undertaking;

c. AS REGARDS THE EXEMPTION FROM MUNICIPAL TAX ON REAL PROPERTY (IMI) FOR OWNERS OF PROPERTIES INTEGRATED IN UNDERTAKINGS WITH RECOGNIZED TOURIST UTILITY:

  • Article 47, paragraph 1 of the Tax Benefits Statute (EBF) stipulates that properties integrated in undertakings to which tourist utility has been recognized are exempt from Municipal Contribution (a reference now considered to be to the Municipal Tax on Real Property) for a period of seven years;

  • The application of this tax benefit to acquirers of properties in tourist undertakings, as in the situation at issue, is not contested. It would be illogical that, with the existence of a tax benefit under IMI for acquirers of properties in tourist undertakings, whose purpose is to support investment in these undertakings, the rule on IMT exemption were interpreted to exclude the same entities;

d. AS REGARDS THE QUALITY OF THE ACQUIRER OF PROPERTY INTEGRATED IN A TOURIST UNDERTAKING AS PROMOTER:

  • The intervention of acquirers of properties integrated in tourist undertakings in the manner verified in the situation of the present case in no way differs from that of real estate promoters, to which the Respondent intends to confine the tax benefit provided for in article 20 of Decree-Law No. 423/83, since they are the true drivers of the undertaking and the guarantors of its realization;

e. ON THE PRINCIPLES OF LEGAL CERTAINTY AND SECURITY AND THE DUAL CONTROL OF LEGALITY BY THE NOTARY AND THE REGISTRY OFFICER:

  • The Claimant acted in accordance with what it considers the only correct interpretation of the law, an interpretation that was confirmed by the public entities involved in the transaction and invested with control power as to compliance with tax obligations;

  • In this regard, article 49, paragraph 1 of the Code of Municipal Tax on Onerous Transfers of Real Property (CIMT) states that notaries and other officials performing notarial functions, as well as entities and professionals with competence to authenticate private documents (…) cannot execute deeds, any other notarial documents or private documents or authenticate private documents that effect transfers of real property nor proceed with the acknowledgment of signatures in contracts (…) without being presented with the extract of the statement referred to in article 19 of the CIMT accompanied by the corresponding proof of collection (…). Paragraph 3 of the same provision complements that, where there is an exemption, the same entities must note the exemption and require the document proving such, which they file;

  • Likewise, article 72, paragraph 1 of the Property Registry Code (CRPred.) provides that no act subject to charges of a fiscal nature can be definitively registered without showing that the tax rights are paid or secured, with the registry officer bearing the control of those obligations;

  • In the case at issue, the referred controls were exercised and the transfer was effected with the recognition, by the entities involved, of the exemption provided for in article 20 of Decree-Law No. 423/83;

  • In turn, the Tax Administration, upon learning that the entities referred to above had recognized the tax exemption, took no action to alter the situation in accordance with its interpretation of the law, allowing the Claimant to consolidate the conviction that it was covered by the scope of the exemption;

  • Being the tax benefit provided for in article 20 of Decree-Law No. 423/83 of automatic granting, upon that benefit being recognized by the Notary and the Registry Officer – entities that hold the control powers over the application of these exemptions in substitution of the Tax Administration – and with no corrective action on the part of the Tax Administration, we are faced with an administrative act of granting of a tax benefit;

  • Under article 141 of the Administrative Procedure Code (CPA), invalid administrative acts can only be revoked on the ground of their invalidity and within the time limit of the respective contentious appeal or until the response of the appealed entity.

  • In the case at issue, beyond the fact that there exists no invalidity of the act, as the requirements for application of the exemption were met, the Tax Administration also could not, defending a different interpretation as to those requirements, seek to revoke the act granting the tax benefit for not meeting the requirements of article 141 of the CPA;

2. RESPONSE

The Respondent responded to the Claimant's petition in the following terms:

  • The IMT exemption provided for in article 20 of Decree-Law No. 423/83 does not require the temporal element of the acquisition, instead depending on whether the acquisition is intended for the installation of a tourist undertaking or, on the contrary, for its exploitation;

  • It will thus be immaterial whether the acquisition occurred before or after the undertaking was installed and operational or not;

  • The question is whether the said exemption rule benefits only acquisitions of properties by promoters with a view to installing tourist undertakings, or also acquisitions of autonomous fractions (lodging units) belonging to or integrated in already constructed and installed undertakings, with a view to their exploitation;

  • The legislator intended, with the provision in article 20 of Decree-Law No. 423/83, acquisitions intended for "installation" of undertakings. If the legislator had wished to cover both the activity of installation and the activity of exploitation of undertakings, it would have been as clear as it was in article 16 of the same statute ("Companies that own and or operate undertakings to which tourist utility has been attributed shall enjoy, with respect to the ownership and operation thereof, the tax benefits indicated below (…)"), or in paragraph 2 of article 20 ("The exemption and reduction established in the preceding paragraph shall also apply in transfers to the operating company, in the case of the owner being a financial leasing company and the transfer occurring under and in accordance with the financial leasing contract that determined the acquisition of the undertaking by the transferring company").

  • The legislator clearly distinguishes, in the said statute (Decree-Law No. 423/83), the concepts of installation and exploitation;

  • It is usual for acquirers of fractions in tourist undertakings in plural ownership to execute tourism operation contracts intended to guarantee the unity and continuity of operation by the operating entity of the tourist undertaking, as well as the permanent allocation to tourist exploitation of all lodging units comprising the undertaking; the restrictions and obligations associated with this acquisition correspond to a new paradigm of operation of tourist undertakings in plural ownership, whereby the lodging units, although capable of being constituted as autonomous fractions, are always considered in tourist exploitation, from which it is inferred that their acquisition is intended for exploitation and not for installation;

  • Also the historical element leads to the conclusion that the reason for being and purpose of article 20, paragraph 1 of Decree-Law No. 423/83 will be to benefit with IMT exemption the promoters who intend to build/create establishments and not mere acquisition of fractions in undertakings;

  • Even if the acquisition of fractions occurred still in the licensing and construction phase of the undertaking, that is, in the installation phase, those acquirers could not be considered as promoters, by contributing to the financing necessary for the installation of the undertaking;

  • The Claimant does not prove that it participated in the promotion of the undertaking, especially since the acquisition was subsequent to the issuance of the operational license;

  • Only the Tax Administration had competence to pronounce on the legal-tax framework of the transaction in question, so if that framework was determinant of the acquirer's will regarding the accomplishment of the transaction, it should have requested from the Respondent binding information; the recognition by the Notary who intervened in the accomplishment of the transaction is not such as to invest the Claimant with any right, with no consequent violation of the principle of legal certainty and security;

  • Being of automatic granting, the exemption provided for in article 20, paragraph 1 of Decree-Law No. 423/83 is not susceptible of being granted through an administrative act, so there exists in the case at issue no administrative act of granting of the exemption.

3. SUBSEQUENT PROCEDURE

With the agreement of the parties, the holding of the meeting provided for in article 18 of the RJAT as well as the production of further pleadings was dispensed with.

II – SANITATION

The singular Arbitral Tribunal was regularly constituted on 25-08-2014, the singular arbitrator having been designated by the Ethics Council of CAAD, with the respective legal and regulatory formalities fulfilled (articles 11, paragraph 1, subparagraphs a) and b) of the RJAT and articles 6 and 7 of the Code of Ethics of CAAD), and is competent ratione materiae, in conformity with article 2 of the RJAT.

The parties have legal personality and capacity, are legitimate and are regularly represented.

No procedural defects were identified.

There are no exceptions nor preliminary questions requiring decision, so nothing prevents deciding the merits of the case.

III – QUESTIONS TO BE DECIDED

The questions to be decided in the present case are:

1st: The existence of an administrative tax act granting to the Claimant the exemption provided for in article 20, paragraph 1 of Decree-Law No. 423/83;

2nd: The applicability of the exemption provided for in article 20, paragraph 1 of Decree-Law No. 423/83 to the acquisition of property in plural ownership, integrated in a tourist undertaking with recognized tourist utility and intended to be operated for tourist purposes in an integrated manner within the referred undertaking.

IV – REASONING

1. FACTUAL MATTER

The following facts are considered proven as relevant to the appraisal of the petition:

  • The Claimant acquired, on 28-12-2015, from company B... – …, S.A., ½ of the fraction BK of the urban property registered in the urban property register of the parish of ... under number ..., intended for services, integrated in the tourist undertaking "C...", located at Av. ..., in ..., parish of ... in the municipality of Loulé, for the price of €255,319.00;

  • On 10 October 2013, the Tax Administration assessed Municipal Tax on Onerous Transfers of Real Property on the acquisition, in the amount of €16,595.74.

The facts considered proven were so based on documentary evidence filed by the Claimant.

It was not proven that the Claimant acquired the property in question for the purpose of allocating it to tourist exploitation.

2. ON THE LAW

a. The existence of an administrative tax act granting to the Claimant the exemption provided for in article 20, paragraph 1 of Decree-Law No. 423/83

According to article 5, paragraph 1 of the Tax Benefits Statute (EBF), tax benefits are "automatic" or "dependent on recognition." Regarding "automatic" benefits, the same provision states that these "result directly and immediately from the law"; as for tax benefits "dependent on recognition," the same legal provision states that these "presuppose one or more subsequent recognition acts."

As to tax benefits that depend on recognition, paragraph 2 of the referred article 5 of the EBF states that "recognition of tax benefits may take place by administrative act or by agreement between the Administration and the interested parties, having, in both cases, merely declarative effect, unless the law provides otherwise."

From this definition it is extracted that "automatic" tax benefits are constituted "ope legis," i.e. by mere effect of the law, once the prerequisites established therein for their constitution are met, not requiring any act of granting or recognition on the part of the tax administration or any other entity and nor any initiative of the interested party (F. PINTO FERNANDES and J. CARDOSO DOS SANTOS, Tax Benefits Statute, Annotated and Commented, 2nd ed. pages 70-71; N. SÁ GOMES, General Theory of Tax Benefits, Tax Science and Technique, 359, page 137).

Taking into account the terms of the distinction, the exemption provided for in article 20, paragraph 1 of Decree-Law No. 423/83 is classified as an "automatic" tax benefit. The law establishes the prerequisites of its application in an objective manner, leaving no margin for discretion, and provides for no procedure for its granting. In this sense, regarding the same exemption that is appraised in the present case, the Supreme Administrative Court (STA, Decision of 14-04-2010, Case No. 120/10; STA, Decision of 10-02-2010, Case No. 935/09; STA, Decision of 10-02-2010, Case No. 797/09; STA, Decision of 27-01-2010, Case No. 1119/09; STA, Decision of 20-01-2010, Case No. 937/09; STA, Decision of 23-01-2013, Case No. 1069/12) has pronounced itself on numerous occasions.

Thus, the tax benefit in question could not be granted through an act of the Tax Administration, i.e. through an administrative tax act.

There did not exist, therefore, any administrative tax act granting the tax benefit at issue, susceptible of being revoked.

b. The applicability of the exemption provided for in article 20, paragraph 1 of Decree-Law No. 423/83 to the acquisition of property in plural ownership, integrated in a tourist undertaking with recognized tourist utility and intended to be operated for tourist purposes in an integrated manner within the referred undertaking

Article 20, paragraph 1 of Decree-Law No. 423/83 provides that "acquisitions of properties or autonomous fractions intended for the installation of undertakings qualified as having tourist utility (…) are exempt from Sisa and taxes on succession and donations, with Stamp Duty reduced to one-fifth."

The question that arises is reduced to ascertaining whether the act through which a taxpayer acquires a property in plural ownership, integrated in a tourist undertaking, in the construction phase or immediately after construction, but in any case at a moment prior to the beginning of tourist exploitation, should be considered as an act of installation of the tourist undertaking, for purposes of the provision in paragraph 1 of article 20 of Decree-Law No. 423/83.

On the referred question there exists solid and uniform case law of the superior administrative courts, from which one may cite as examples the decisions of the Supreme Administrative Court previously referred to. In the decision of 23-01-2013 (Case No. 1069/12), the question is synthesized in the following terms:

«I – In the determination of the meaning and scope of tax rules and in the qualification of facts to which the same apply, the general rules and principles of interpretation and application of laws are observed, being that "Whenever, in tax rules, terms proper to other branches of law are employed, the same should be interpreted in the same sense that they have there, unless another result directly from the law" (article 11, paragraphs 1 and 2, of the General Tax Law).

II – Within the scope of the legal regime of installation, operation and functioning of tourist undertakings, established in Decree-Law No. 39/2008, of 7 March, the concept of installation of a tourist undertaking comprises the set of legal acts and the procedures necessary for licensing (in the broad sense, comprising prior notifications or authorizations, as the case may be) of the urbanistic operations necessary for the construction of a tourist undertaking, as well as the obtaining of the titles that render it apt to function and to be operated for the tourist purpose (cfr. Chapter IV, articles 23 et seq.).

III – When the legislator uses the expression acquisition of properties or autonomous fractions intended for "installation," for purposes of the benefit to which article 20, paragraph 1, of Decree-Law No. 423/83, of 5 December, refers, it cannot fail to be understood as referring precisely to the acquisition of properties (or autonomous fractions) for construction of tourist undertakings, after the respective urbanistic operations are duly licensed, aiming to benefit the companies dedicated to the activity of promotion/creation thereof.

IV – This concept of "installation" is that which proves adequate to all types of tourist undertakings and is not put in issue by the fact that undertakings may be constructed/installed under a plural ownership regime, since this has to do with "operation" and not with "installation."

V – In tourist undertakings constituted in plural ownership (which comprise lots and or autonomous fractions of one or more buildings, pursuant to the provision in article 52, paragraph 1, of Decree-Law No. 39/2008, of 7 March), two distinct procedures stand out, although they may occur simultaneously: one relating to the practice of the operations necessary to install the undertaking; another, relating to the operations necessary to place it in operation and to operate it, with the sale of the projected or constructed units necessarily forming part of the second.

VI – The legislator intended to promote tourist activity by providing for exemption/reduction of payment of Sisa/Stamp Duty, for promoters who intend to build/create establishments (or readapt and remodel existing fractions) and not when it is merely the acquisition of fractions (or lodging units) integrated in undertakings and intended for operation, even if acquired on a date prior to the installation/licensing of the undertaking itself.

VII – Whoever acquires the fractions does not become a co-financier of the undertaking, with responsibility for its installation, since they are acquiring a tourist product that has been placed on the market by the promoter, whether the acquisition is made in plan or after the undertaking is installed, as any final consumer, especially since the fractions may be acquired for its exclusive use and without any temporal limit (in the case of tourist undertakings constituted in plural ownership).

VIII – Not being a question of the acquisition of properties or autonomous fractions intended for the construction/installation of tourist undertakings, but rather the acquisition of lodging units by final consumers, even if because integrated in the undertaking in question they are allocated to tourist exploitation, the same cannot benefit from the exemptions enshrined in article 20, paragraph 1, of Decree-Law No. 423/83.

IX – This interpretive result is that which results from the historical, rational/teleological and also literal element of the legal rules in question.»

In accordance with the understanding adopted in the cited decision, which is entirely endorsed, installation does not thus comprise, the activities of equipping the properties integrated in tourist undertakings, even if such activities are intended (such activities) for tourist exploitation.

Thus, it cannot be considered that the acquisition made by the Claimant was intended for installation of a tourist undertaking, for the purposes of article 20, paragraph 1 of Decree-Law No. 423/83.

Consequently, it must be concluded that the prerequisites for application of the exemption established in that same provision were not met with respect to the acquisition underlying the contested liquidation, so the referred liquidation does not suffer from illegality due to error in the legal prerequisites.

V. DECISION

For the reasons stated, this Tribunal decides to declare the present arbitral petition wholly without merit.

Economic utility value of the case: The economic utility value of the case is fixed at €16,595.74.

Costs: Pursuant to article 22, paragraph 4, of the RJAT, the amount of costs is fixed at €1,224.00, in accordance with Table I annexed to the Regulation of Costs in Tax Arbitration Proceedings, at the charge of the Claimant.

Let this arbitral decision be registered and notified to the parties.

Lisbon, Administrative Arbitration Centre, 2 March 2015

The Arbitrator

(Nina Aguiar)

[1] Legal Framework for the Installation, Operation and Functioning of Tourist Undertakings, approved by Decree-Law No. 39/2008, of 7 March.

Frequently Asked Questions

Automatically Created

Is the acquisition of a property integrated in a tourism enterprise exempt from IMT under Article 20(1) of Decreto-Lei 423/83?
Under Article 20(1) of Decree-Law 423/83, IMT exemption for properties integrated in tourism enterprises with recognized tourist utility is primarily designed for acquisitions made to install the tourist undertaking. The central dispute in Case 439/2014-T concerns whether this exemption extends to secondary acquirers of fractions or applies only to the initial promoter/developer. The claimant argued that acquiring a fraction in an already-established tourist complex constitutes participation in the 'installation' process, particularly when the acquirer commits the property to tourism exploitation through operation contracts and cannot legally use it for any other purpose. However, the traditional interpretation limits the exemption to the promoter who acquires land or property specifically to construct and establish the tourist undertaking, not to subsequent investors purchasing operational units.
What are the requirements for IMT exemption on properties with recognized tourist utility in Portugal?
The requirements for IMT exemption on properties with recognized tourist utility under Decree-Law 423/83 involve: (1) the property must be integrated in a tourist undertaking with officially recognized tourist utility status; (2) the acquisition must be made for the purpose of 'installing' a tourist undertaking; and (3) the exemption traditionally applies to the promoter's acquisition for construction and establishment of the facility. In Case 439/2014-T, the claimant attempted to expand this interpretation by arguing that acquirers who finance the investment, commit properties to exclusive tourism use through operation contracts, maintain properties to high standards with appropriate furnishings and insurance, and cannot legally use the property for any other purpose should also qualify. The claimant contended that installation is only complete when individual units are commercialized and equipped, making acquirers essential participants in the installation process rather than mere secondary purchasers.
Can an investor who acquires a fraction of a tourist enterprise property benefit from IMT exemption as a promoter?
An investor who acquires a fraction of a tourist enterprise property faces significant challenges claiming IMT exemption as a 'promoter' under Article 20 of Decree-Law 423/83. In Case 439/2014-T, the claimant was liquidated IMT at 6.5% despite arguing for promoter status. The investor's arguments included: participating in financing the undertaking's installation; executing tourism operation contracts that dedicate the property exclusively to tourism; maintaining the property equipped and insured to tourist accommodation standards; and the legal impossibility under RJIEFET of using the property for non-tourism purposes. The claimant also argued that Article 39-A of the former CIMSISD already provided SISA deduction mechanisms for developers, suggesting Article 20 was intended to benefit acquirers. However, the Tax Authority's position—reflected in the IMT liquidation—is that the exemption applies to the initial promoter acquiring property to construct the undertaking, not to investors purchasing completed or nearly-completed fractions. When the exemption is denied, the standard progressive IMT rates apply, reaching 6.5% for higher-value urban properties.
How does the CAAD assess the scope of the IMT exemption for tourism-related real estate transactions?
The CAAD (Administrative Arbitration Center) assesses the scope of IMT exemption for tourism-related real estate by analyzing the legislative intent behind Article 20(1) of Decree-Law 423/83 and the specific facts of each acquisition. In Case 439/2014-T, key considerations include: (1) whether 'installation of a tourist undertaking' encompasses only the promoter's initial development activities or extends to subsequent commercialization of individual units; (2) the economic reality that acquirers, not promoters, often finance construction through advance payments under promissory contracts; (3) whether acquirers who commit properties to exclusive tourism exploitation and maintain them to operational standards participate meaningfully in 'installation'; (4) the distinction between real estate investment and investment in creating tourism supply; and (5) the relationship between Article 20 and former mechanisms like Article 39-A CIMSISD that addressed promoter tax burdens. The tribunal must balance the policy objective of promoting tourism investment against the statutory language limiting exemption to acquisitions 'for installation' of tourist undertakings, determining whether this phrase encompasses only primary development transactions or also includes acquisitions by investors who operationalize individual units.
What is the applicable IMT rate when the exemption for properties in tourism enterprises is denied?
When the IMT exemption for properties in tourism enterprises is denied, the applicable tax rate follows the standard progressive IMT schedule for urban properties under the IMT Code (CIMT). In Case 439/2014-T, the Tax Authority applied a 6.5% rate to the taxable value of €255,319.00 (half of the fraction's €510,638.00 valuation). The progressive IMT rates for urban properties not designated for habitation (such as the services-designated property in this case) reach 6.5% for higher value brackets. This contrasts sharply with the complete exemption the claimant expected under Article 20 of Decree-Law 423/83. The financial impact is substantial—the claimant faced an IMT liability of approximately €16,595.74 on their €255,319.00 acquisition. This significant tax burden underscores why investors in tourist real estate closely scrutinize their eligibility for the Article 20 exemption and why the scope of 'installation of a tourist undertaking' is critically important. Investors who incorrectly assume exemption applies may face unexpected tax liabilities when the Tax Authority takes the position that only the initial promoter/developer qualifies for the benefit.