Summary
Full Decision
ARBITRAL DECISION
The arbitrators Councillor Jorge Lopes de Sousa (arbitrator-president), Professor Doctor Vasco Valdez and Professor Doctor Nuno Cunha Rodrigues (arbitrators-members), designated by the Ethics Council of the Centre for Administrative Arbitration to form the Arbitral Court, constituted on 19-11-2018, agree as follows:
1. Report
A... – PROPERTY FUND MANAGEMENT COMPANY, S.A., (hereinafter referred to as "Claimant"), with tax identification number ... and with registered office at ..., n.º..., ...-... Porto, in its capacity as management company and representing B... – SPECIAL CLOSED REAL ESTATE INVESTMENT FUND (hereinafter abbreviated as "B..."), with tax identification number..., C... – CLOSED REAL ESTATE INVESTMENT FUND (hereinafter referred to as "C..."), with tax identification number..., and D... – CLOSED REAL ESTATE INVESTMENT FUND (hereinafter referred to as "D..."), with tax identification number..., (all hereinafter referred to as "Funds"), came, under the terms of Decree-Law No. 10/2011, of 20 January (hereinafter "RJAT"), to request the constitution of an Arbitral Court.
The Claimant requests the examination of the legality of official revision requests submitted to the Tax and Customs Authority with a view to annulling several Municipal Tax on Onerous Property Transfers ("IMT") assessments, in the total amount of € 903,483.88, following the formation of the presumption of tacit dismissal of those requests, as well as regarding the IMT assessment acts themselves, which are as follows:
– Official revision request submitted on 14 February 2018 by Fund B..., relating to IMT tax assessment acts ... of 16/09/2016, and ... of 07/06/2017, in the total amount of € 451,750.00;
– Two official revision requests submitted on 14 February 2018 by Fund C..., relating to IMT tax assessment acts ... of 19/06/2014, and ... of 12/05/2014, in the total amount of € 35,425.00;
– Three official revision requests submitted on 14 February 2018 and one on 19 February 2018 by Fund D..., relating to IMT tax assessment acts ... of 30/04/2015, ... of 12/11/2015, ... of 02/12/2015, ... of 09/12/2015, ... of 04/05/2017, ... of 13/09/2017, ... of 13/01/2015, ... of 11/01/2017, ... of 21/09/2015, ... of 21/09/2015 and ... of 14/12/2017, in the total amount of € 416,308.88.
The Claimant further requests the return of the amount paid plus compensatory interest.
The respondent is the TAX AND CUSTOMS AUTHORITY.
The request for constitution of the arbitral court was accepted by the President of CAAD and automatically notified to the Tax and Customs Authority on 07-09-2018.
Pursuant to the provisions of paragraph a) of Article 6(2) and paragraph b) of Article 11(1) of RJAT, in the wording introduced by Article 228 of Law No. 66-B/2012, of 31 December, the arbitrators initially designated by the Ethics Council communicated acceptance of the assignment within the applicable period.
On 29-10-2018 the parties were duly notified of this designation and did not manifest any intention to refuse the designation of the arbitrators, in accordance with the combined terms of Article 11(1) paragraphs a) and b) of RJAT and Articles 6 and 7 of the Ethics Code.
Thus, in accordance with the provision in paragraph c) of Article 11(1) of RJAT, in the wording introduced by Article 228 of Law No. 66-B/2012, of 31 December, the collective arbitral court was constituted on 19-11-2018.
The Tax and Customs Administration was notified in accordance with Article 17 of RJAT, but stated that it presents no Reply.
By order of 03-01-2019, the meeting provided for in Article 18 of RJAT was dispensed with and arguments were given and a date for the decision was indicated.
The arbitral court was regularly constituted, in accordance with the provisions of Articles 2(1) paragraph a) and 10(1) of Decree-Law No. 10/2011, of 20 January, and is competent.
The parties are duly represented, have legal personality and capacity, are legitimate and are represented (Articles 4 and 10(2) of the same decree and Article 1 of Ordinance No. 112-A/2011, of 22 March).
The process is not affected by nullities.
2. Matters of Fact
2.1. Proven Facts
The following facts are considered proven:
A) The Funds represented here by the Claimant are configured as closed real estate investment funds managed by it;
B) In the exercise of its activity, the Claimant acquires real property on behalf of the Funds which are integrated into the assets of these Funds managed by it;
C) The Claimant, in representation of the Funds, acquired, by public deed of purchase and sale, the real property better discriminated below, acquisitions which were subject to and taxed under IMT:
• Acquisitions for Fund B..., to which the public deeds joined with the arbitral ruling request as Document 7, whose contents are given as reproduced:
o On 16 September 2016, a property located in the parish of..., municipality of Cascais (U-...-A), a property located in the parish of..., municipality of Ourém (U-...-G), two properties located in the union of parishes of... and..., municipality of Vila Nova de Gaia (U-...-A and U-...-N) and a property located in the union of parishes of..., ..., ..., ..., ... and..., municipality of Porto (U-...); and
o On 7 June 2017, a property located in the parish of..., municipality of Figueira da Foz (U-...).
• Acquisitions for Fund C..., to which the public deeds joined with the arbitral ruling request as Document 8, whose contents are given as reproduced:
o On 20 June 2014, a property located in the union of parishes of..., ... and..., municipality of Braga (U-...-A) and a property located in the union of parishes of... (..., ... and...), municipality of Braga (U-...-A);
o On 13 May 2014, two properties located in the union of parishes of... (..., ... and...), municipality of Braga (U-... and U-...);
• Acquisitions for Fund D... to which the public deeds joined with the arbitral ruling request as Document 9, whose contents are given as reproduced:
o On 13 January 2015, four properties located in the parish of..., municipality of Coimbra (U-..., U-..., U-... and U-...);
o On 22 September 2015, two properties located in the parish of..., municipality of Campo Maior (U-... and U-...);
o On 15 December 2017, a property located in the union of parishes of... and..., municipality of Almada (U-...);
o On 13 January 2017, a property located in the parish of..., municipality of Olhão (U-...);
o On 30 April 2015, two properties located in the parish of..., municipality of Figueira da Foz (U-... and U-...);
o On 13 November 2015, a property located in the union of parishes of... and..., municipality of Monção (U-...);
o On 3 December 2015, a property located in the union of parishes of..., ..., ..., ..., ... and..., municipality of Porto (U-...);
o On 9 December 2015, two properties located in the union of parishes of..., ..., ..., ..., ... and..., municipality of Porto (U-... and U-...);
o On 4 May 2017, a property located in the union of parishes of... (... and...), municipality of Braga (U-...-B); and
o On 14 September 2017, a property located in the union of parishes of... and..., municipality of Sintra (U...);
D) With regard to the aforementioned acquisitions of property for Fund B... the IMT assessments No. ... of 16/09/2016, and No.... of 07/06/2017, were issued, in the total amount of € 451,750.00 (document No. 2 joined with the arbitral ruling request, whose content is given as reproduced);
E) With regard to the aforementioned acquisitions of property for Fund C... the IMT assessments No. ... of 19/06/2014, and No.... of 12/05/2014, were issued, in the total amount of € 35,425.00, (document No. 4 joined with the arbitral ruling request, whose content is given as reproduced);
F) With regard to the aforementioned acquisitions of property for Fund D... the IMT assessments No. ... of 30/04/2015, No.... of 12/11/2015, No.... of 02/12/2015, No.... of 09/12/2015, No.... of 04/05/2017, No.... of 13/09/2017, No.... of 13/01/2015, No.... of 11/01/2017, No..... of 21/09/2015, No.... of 21/09/2015 and No.... of 14/12/2017, were issued, in the total amount of € 416,308.88 (document No. 6 joined with the arbitral ruling request, whose content is given as reproduced);
G) The assessed amounts were paid by the respective Funds (documents Nos. 2, 4 and 6 joined with the arbitral ruling request, whose contents are given as reproduced);
H) The Claimant submitted on 14-02-2018 three requests for revision of the aforementioned assessment acts, in representation of each of the Funds (documents Nos. 1, 3 and 5, joined with the arbitral ruling request, whose contents are given as reproduced);
I) The aforementioned requests for revision of the assessment acts were not decided until 06-09-2018, the date on which the Claimant submitted the arbitral ruling request that gave rise to the present process.
2.2. Unproven Facts and Justification of the Decision on Matters of Fact
There are no facts relevant to the decision of the case that have not been proven.
The proven facts are based on documents submitted by the Claimant whose correspondence with reality is not contested by the Tax and Customs Authority.
No administrative file was submitted.
3. Matters of Law
The Claimant represents closed real estate investment funds which acquired real property in the years 2014, 2015, 2016 and 2017, with IMT being assessed by the Tax Administration in relation to each acquisition.
Article 1 of Decree-Law No. 1/87, of 3 January, establishes that "acquisitions of real property made for a real estate investment fund by its respective management company are exempt from sisa".
The Claimant argues that the acquisitions of the properties carried out are exempt from IMT, as this exemption is applicable to it, and it was not revoked on the dates when it made the acquisitions of the properties to which the challenged assessments relate.
Decree-Law No. 1/87 refers to sisa and not to IMT, but Decree-Law No. 287/2003, of 12 November, which reformed the taxation of property, revoked by its Article 31(3) the Code of Municipal Tax on Sisa and the Tax on Successions or Donations, but established in Article 28(2) that "all legal texts that mention the Code of Municipal Tax on Sisa and the Tax on Successions and Donations, municipal tax on sisa or tax on successions and donations shall be considered to refer to the Code of Municipal Tax on Onerous Property Transfers (CIMT), the Tax on Stamps Code, the municipal tax on onerous property transfers (IMT) and the stamp tax, respectively".
Article 31(6) of Decree-Law No. 287/2003, establishes that "the tax benefits relating to local authority contribution, now referred to IMI, as well as those relating to the municipal tax on sisa established in legislation outside the Code approved by Decree-Law No. 41969, of 24 November 1958, and in the Tax Expenditures Statute, which shall be referred to IMT, remain in force".
The aforementioned acquisitions fall within the provision of Article 1 of Decree-Law No. 1/87, so that, if this rule remains in force, the exemption shall apply, referred to IMT, by virtue of these rules of Decree-Law No. 287/2003.
The essential question to be decided is, therefore, whether or not Article 1 of Decree-Law No. 1/87 was repealed, namely by Law No. 53-A/2006, of 29 December.
3.1. Regime for Termination of Validity of Law
The general regime for termination of the validity of law is provided for in Article 7 of the Civil Code, which establishes the following:
Article 7
Cessation of the validity of law
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Where it is not intended to have temporary validity, a law only ceases to be valid if it is repealed by another law.
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Repeal may result from express declaration, from incompatibility between the new provisions and the preceding rules or from the circumstance that the new law regulates the entire subject matter of the former law.
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General law does not repeal special law, except if that is the unequivocal intention of the legislator.
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Repeal of the repealing law does not result in the revival of the law which it had repealed.
No temporary validity was provided for in Article 1 of Decree-Law No. 1/87, so any cessation of its validity can only result from repeal (express or tacit) by another law, as follows from Article 7(1) of the Civil Code.
3.1.1. Express Repeal
No express repeal occurred, namely before or with the approval of the TES, by Decree-Law No. 215/89, of 1 July.
In fact, the approval of the TES was preceded by a comprehensive reassessment of tax benefits, which was initiated by Law No. 2/88, of 26 January (State Budget for 1989), which in its Article 49 repealed various tax benefits, including that provided for in Article 7 of Decree-Law No. 1/87, but not that provided for in Article 1, which is at issue here.
The list of tax benefits expressly repealed was subsequently completed by Decree-Law No. 485/88, of 30 December, in which the tax benefit provided for in that Article 1 of Decree-Law No. 1/87 is also not included.
After the approval of the TES, there is also no law that expressly repeals that Article 1 of Decree-Law No. 1/87.
Namely, express repeal was proposed by the Government in Article 81(3) of the Draft State Budget for 2007 (Draft Law No. 99/X), in a list of tax benefits to be repealed, but was not included in the approved budget law (Law No. 53-A/2006, of 29 December), although the express repeal of other tax benefits was maintained (in Article 87).
It is thus unequivocal that Article 1 of Decree-Law No. 1/87 was not expressly repealed.
3.2. Tacit Repeal
In the absence of express repeal, any possible repeal of that Article 1 of Decree-Law No. 1/87 can only result from tacit repeal, resulting from "incompatibility between the new provisions and the preceding rules or from the circumstance that the new law regulates the entire subject matter of the former law".
The TES, in its original wording (Decree-Law No. 215/89, of 1 July), does not include any provision on property taxes relating to real estate investment funds, so it cannot be understood that it has regulated the entire subject matter of the former law.
Moreover, the aforementioned fact that the TES was preceded by the express repeal of tax benefits, which included one of those provided for in Decree-Law No. 1/87, but not that provided for in its Article 1, requires that it be concluded that it was not intended to repeal this tax benefit.
Decree-Law No. 189/90, of 8 June, added to the TES Article 56 relating to "Real estate investment funds", establishing that "real property integrated in real estate investment funds are exempt from local authority contribution". Law No. 39-B/94, of 27 December, amended the wording of this article to "real property integrated in real estate investment funds and equivalent, pension funds established in accordance with national legislation and savings-retirement funds are exempt from local authority contribution".
With the renumbering carried out by Decree-Law No. 198/2001, of 3 July, this Article 56 was replaced by Article 46.
Law No. 32-B/2002, of 30 December, gave Article 46 the following wording: "Real property integrated in real estate investment funds and equivalent, pension funds and savings-retirement funds which are established and operate in accordance with national legislation are exempt from local authority contribution".
With Law No. 53-A/2006, of 29 December, Article 46 of the TES came to cover tax benefits under IMT, relating to real property integrated in real estate investment funds.
This Article 46 was given the following wording:
1 - Real property integrated in real estate investment funds, pension funds and savings-retirement funds which are established and operate in accordance with national legislation are exempt from municipal property tax (IMI) and municipal tax on onerous property transfers (IMT).
2 - Real property integrated in mixed or closed real estate investment funds with private subscription by non-qualified investors or by financial institutions on their behalf do not benefit from the exemptions referred to in the preceding paragraph, with IMI and IMT rates being reduced by half.
With Decree-Law No. 108/2008, of 26 June, this Article 46 was replaced by Article 49 of the TES.
This Article 49 was successively amended by Law No. 3-B/2010, of 28 April, by Law No. 55-A/2010, of 31 December, by Law No. 83-C/2013, of 31 December, and was subsequently repealed by Law No. 7-A/2016, of 30 March.
In any of the aforementioned wording, Article 49 only refers to real property integrated in real estate investment funds, not referring to IMT relating to their acquisition.
In this context, it cannot be understood that tacit repeal has occurred of Article 1 of Decree-Law No. 1/87, since no law has regulated all the subject matter provided for in it, in particular that concerning benefits relating to acquisition of real property by real estate investment funds.
On the other hand, no provision is found that is incompatible with that tax benefit, as the Claimant argues, "whereas the IMT exemption provided for in Article 1 of Decree-Law No. 1/87 applies to situations where the Fund is in the capacity of acquirer, i.e., when it acquires real property to integrate into its assets, the exemption in Article 46 of the TES applies to situations where the Fund is in the position of seller, i.e., when it proceeds to sell the real property that already integrate its assets".
In fact, acquisitions of real property made for a real estate investment fund to which Article 1 of Decree-Law No. 1/87 refers are not covered by Article 46 of the TES.
Furthermore, as the Claimant says, the existence of benefits relating to the acquisition of real property concurrently with benefits relating to their transfer is expressly provided for in the urban rehabilitation incentives regime, in paragraphs b) and c) of Article 45 of the TES in the wording introduced by Law No. 114/2017, of 29 December (and was previously provided for in Article 45(2) and in Article 71(8)), which demonstrates that, from a legislative perspective, there is no obstacle to the cumulation of benefits relating to acquisition with benefits concerning transfer of real property.
Thus, given there is no incompatibility of benefits for acquisition of real property with benefits for their transfer, the regime of the aforementioned Article 46 (later Article 49) is not incompatible with the maintenance of the exemption for acquisition of real property by real estate investment funds.
For this reason, it cannot be concluded that Article 46 of the TES regulates the entire subject matter of exemptions for real estate investment funds, it being perfectly acceptable that it introduced a new exemption, with the previously existing one persisting.
Thus, as was understood in the arbitral award delivered in process No. 544/2016-T, "the exemptions under analysis are substantially and structurally different and independent of one another, and cannot in any way be considered contrary, contradictory or logically irreconcilable. And much less could they be considered legally and economically incompatible. One retains its own utility independently of what may happen to the other".
Furthermore, and decisively, the aforementioned fact that express repeal of Decree-Law No. 1/87 was included in the proposal for the State Budget for 2007, and the proposal was not approved, corroborates the conclusion that it was not intended to repeal its Article 1. In fact, presuming that the legislator knew how to express its thinking in adequate terms (Article 9(3) of the Civil Code), the omission from Law No. 53-A/2006 of the express repeal that had been proposed has, objectively, the effect of expressing that it was not intended to repeal that rule, as the appropriate way to express a hypothetical intention of repeal was to refer to it expressly, approving the proposal, and not to obscure it with silence, which, in this context, is appropriate to express intention to reject the proposed repeal.
For this reason, it must be concluded that Article 1 of Decree-Law No. 1/87, of 3 January, was not tacitly repealed, nor was it repealed in 2017 and 2018, when the aforementioned acquisitions were made. ( )
Consequently, the challenged assessments are defective due to violation of law which justifies their annulment, under Article 163(1) of the Administrative Procedure Code subsidiarily applicable under Article 2 paragraph c) of the General Tax Law.
The tacit dismissals of the revision requests suffer from the same defect so their annulment is also justified.
4. Reimbursement of Amounts Paid and Compensatory Interest
The Claimant requests reimbursement of the tax unduly paid, plus compensatory interest.
4.1. Reimbursement of Amounts Paid
In accordance with the provisions of paragraph b) of Article 24 of RJAT, the arbitral decision on the merits of the claim which is not subject to appeal or challenge binds the Tax Administration from the end of the period provided for appeal or challenge, and the latter must, in the exact terms of the merits of the arbitral decision in favour of the taxpayer and until the end of the period provided for the spontaneous execution of decisions of tax courts, "restore the situation that would exist if the tax act which is the subject of the arbitral decision had not been carried out, adopting the acts and operations necessary for this purpose", which is in line with the provision in Article 100 of the General Tax Law [applicable by virtue of the provision in paragraph a) of Article 29(1) of RJAT] which establishes that "the tax administration is obliged, in case of full or partial success of a claim, judicial challenge or appeal in favour of the taxpayer, to the immediate and full restoration of the legality of the act or situation that is the subject of the dispute, including the payment of compensatory interest, if applicable, from the end of the period of execution of the decision".
Although Article 2(1) paragraphs a) and b) of RJAT uses the expression "declaration of illegality" to define the competence of arbitral courts operating in CAAD, making no reference to condemnatory decisions, it should be understood that they include within their competences the powers which, in judicial challenge proceedings, are attributed to tax courts, this being the interpretation which is in line with the legislative authorization on which the Government based itself to approve RJAT, in which it proclaims, as the first guideline, that "the tax arbitration process must constitute an alternative procedural means to the judicial challenge process and to action for the recognition of a right or legitimate interest in tax matters".
Judicial challenge proceedings, despite being essentially a process of annulment of tax acts, admit the condemnation of the Tax Administration to pay compensatory interest, as can be inferred from Article 43(1) of the General Tax Law, in which it is established that "compensatory interest is due when it is determined, in a gracious claim or judicial challenge, that there was error attributable to the services from which the payment of the tax debt results in an amount greater than legally due" and from Article 61(4) of the Tax Procedural Code (in the wording given by Law No. 55-A/2010, of 31 December, corresponding to (2) in the original wording), which "if the decision that recognized the right to compensatory interest is judicial, the payment period counts from the beginning of the period of its spontaneous execution".
Thus, Article 24(5) of RJAT, in stating that "the payment of interest is due, regardless of its nature, in accordance with the terms provided for in the general tax law and in the Tax Procedural Code", should be understood as allowing the recognition of the right to compensatory interest in the arbitration process.
On the other hand, as the right to compensatory interest depends on the existence of the right to reimbursement of a sum, from that competence to decide on the right to compensatory interest it is inferred that it extends to the examination of the right to reimbursement.
As the assessments must be annulled, the Claimant is entitled to be reimbursed of the amounts unduly paid.
4.2. Compensatory Interest
Article 43 of the General Tax Law establishes the regime for compensatory interest, in the following terms, in what is relevant here:
Article 43
Unduly Paid Tax Liability
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Compensatory interest is due when it is determined, in a gracious claim or judicial challenge, that there was error attributable to the services from which the payment of the tax debt results in an amount greater than legally due.
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Error attributable to the services is also considered to exist in cases where, although the assessment is made based on the taxpayer's declaration, the latter has followed in its completion the general guidance of the tax administration, duly published.
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Compensatory interest is also due in the following circumstances:
a) When the legal period for official restitution of taxes is not met;
b) In case of annulment of the tax act on the initiative of the tax administration, from the 30th day after the decision, without the credit note having been processed;
c) When the revision of the tax act on the initiative of the taxpayer is carried out more than one year after the taxpayer's request, unless the delay is not attributable to the tax administration.
The assessments were not challenged within the legal period for challenge, namely within the period provided for in Article 10(1) paragraph a) of RJAT, nor within the periods for gracious claims and judicial challenge provided for in Articles 70 and 102 of the Tax Procedural Code.
In these situations where challenge is not made within the periods for judicial challenge and gracious claims, Article 43(1) of the General Tax Law is not applicable.
Thus, the possibility of the Funds represented by the Claimant having the right to compensatory interest must be assessed in accordance with Article 43(3), which provides for the situation in its paragraph c).
As there established, in cases of official revision of assessment acts, compensatory interest is only due after one year has elapsed since the taxpayer's initiative, and not from the date of the disbursement of the assessed amount.
In this sense, the Supreme Administrative Court has repeatedly pronounced itself, as can be seen from the following awards: of 6-07-2005, process No. 0560/05; of 02-11-2005, process No. 0562/05; of 17-05-2006, process No. 016/06; of 24-05-2006, process No. 01155/05; of 02-11-2006, process No. 0604/06; of 15-11-2006, process No. 028/06; of 10-01-2007, process No. 523/06; of 17-01-2007, process No. 01040/06; of 12-12-2006, process No. 0918/06; of 15-02-2007, process No. 01041/06; of 06-06-2007, process No. 0606/06; of 10-07-2013, process No. 390/13; of 18-01-2017, process No. 0890/16; of 10-5-2017, process No. 01159/14.
In the case in question, more than one year has not elapsed until the tacit dismissal of the official revision requests submitted on 14-02-2018 was formed, so there is no right to compensatory interest.
5. Decision
In accordance with the foregoing, this Arbitral Court agrees to:
a) Judge the arbitral ruling request to be well-founded as to the annulment of the IMT assessments and the tacit dismissals of the official revision requests;
b) Annul the following IMT assessments Nos.:
• Assessment No. ... of 2016
• Assessment No. ... of 2017
• Assessment No. ... of 2014
• Assessment No. ... of 2014
• Assessment No. ... of 2015
• Assessment No. ... of 2015
• Assessment No. ... of 2015
• Assessment No. ... of 2015
• Assessment No. ... of 2017
• Assessment No. ... of 2017
• Assessment No. ... of 2015
• Assessment No. ... of 2017
• Assessment No. ... of 2015
• Assessment No. ... of 2015
• Assessment No. ... of 2017
c) Judge the request for reimbursement of amounts paid to be well-founded and condemn the Tax and Customs Authority to pay to the Claimant the sum of € 903,483.88;
d) Judge the request for compensatory interest to be ill-founded and absolve the Tax and Customs Authority of this request.
6. Value of the Process
In accordance with the provisions of Articles 296(1) of the Code of Civil Procedure and 97-A(1) paragraph a) of the Tax Procedural Code and 3(2) of the Regulation of Costs in Tax Arbitration Processes, the value of the process is fixed at € 903,483.88.
7. Costs
Under Article 22(4) of RJAT, the amount of costs is fixed at € 12,852.00, in accordance with Table I annexed to the Regulation of Costs in Tax Arbitration Processes, charged to the Tax and Customs Authority.
Lisbon, 07-01-2019
The Arbitrators
(Jorge Lopes de Sousa)
(Vasco Valdez)
(Nuno Cunha Rodrigues)
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