Summary
Full Decision
ARBITRAL DECISION
I. REPORT
A..., S.A., legal entity no. ..., with tax domicile at ..., nos. ..., ..., ...–..., hereinafter referred to as the "Claimant", requested the constitution of an Arbitral Tribunal, pursuant to articles 2, no. 1, subsection a) and 10 and following of the Legal Regime for Tax Arbitration ("LRTA"), approved by Decree-Law no. 10/2011, of 20 January, in conjunction with articles 99 and subsection e) of no. 1 of article 102 of the Code of Tax Procedure and Process ("CTPP"), with the Tax and Customs Authority ("TCA") being the Respondent.
The Claimant submitted a request for an arbitral pronouncement against the order issued on 20 June 2018 by the Director of Finance for Évora, which dismissed the request for Official Review that, in turn, concerned the Municipal Property Tax assessments, nos. 2013..., 2013... and 2013..., relating to the first, second and third instalments, respectively, of the year 2013, in the total amount of €35,204.65 (thirty-five thousand, two hundred and four euros and sixty-five cents), requesting, in summary, that the Arbitral Tribunal:
a) Annul the order dismissing the Official Review procedure filed against the Municipal Property Tax assessment acts nos. 2013..., 2013... and 2013..., relating to the year 2013, and likewise, the aforementioned Municipal Property Tax assessment acts and, consequently,
b) Order the reimbursement of the amount of tax paid, plus the respective compensatory interest, calculated at the legal rate in force.
To support its request, the Claimant alleges, in summary, that:
a) It is a limited company incorporated in Portugal that conducts its business in the hotel industry;
b) It is the owner of four urban properties located in the so-called "Historic Centre of Évora";
c) For that reason, those properties are included in the classification as Cultural Heritage of Humanity by UNESCO;
d) It paid the first, second and third instalments of the Municipal Property Tax assessment, in the total amount of €35,204.65;
e) Under subsection n) of no. 1 of article 44 of the Tax Benefits Statute ("TBS"), said properties would be exempt from Municipal Property Tax, and therefore the tax assessment is illegal;
f) Thus, and by not having decided accordingly, the order dismissing the Official Review request violated that provision.
The request for constitution of the Arbitral Tribunal was accepted by the President of CAAD and followed the normal procedure, including notification to the Tax and Customs Authority ("TCA").
The Deontological Council designated the undersigned as sole arbitrator of the Arbitral Tribunal, who communicated acceptance of the assignment within the applicable time period, pursuant to articles 6, no. 1 and 11, no. 1, subsection a), both of the LRTA, and article 4, no. 2 of the Deontological Code of CAAD.
The parties, duly notified, did not express their intention to refuse the designation, pursuant to the provisions of the Deontological Code of CAAD, and the Arbitral Tribunal was constituted on 5 December 2018, in accordance with subsection c) of no. 1 and no. 8 of article 11 of the LRTA.
The Respondent presented its Answer and appended the administrative file. In the Answer presented, the Respondent presented a defence by exception and by challenge in the terms that follow, briefly described.
The TCA begins by invoking the incompetence of the Arbitral Tribunal to assess the dismissals of Official Reviews of Tax Acts because, in its view, subsection a) of article 2 of Ordinance 112-A/2011, of 22 March excludes, literally, from the scope of the Respondent's binding to arbitral jurisprudence this procedural means.
a) The Respondent understands that, "(…) by virtue of article 2-a) of Ordinance no. 112-A/2011, disputes that have as their subject the declaration of illegality of assessments as occurs in the situation sub judice, are excluded from the material competence of arbitral tribunals, if not preceded by a Gracious Complaint in accordance with articles 131 to 133 of the CTPP, regardless of whether it is mandatory under the cited provision or whether the taxpayer has opted (sibi imputet) for Official Review" (§ 45 of the Answer).
b) This same understanding is imposed by virtue of the constitutional principles of the Rule of Law, Separation of Powers and Legality as a corollary of the principle of unavailability of tax credits that bind the legislator and all activity of the Respondent.
c) By challenge, the Respondent alleges that the Claimant's argumentation rests on erroneous assumptions and makes an incorrect interpretation and application of the applicable legal norms.
d) According to the Respondent, "(…) since 2001 there NO LONGER exists a classification called National Monument, but only classifications called Heritage of National Interest, Heritage of Public Interest or Heritage of Municipal Interest (…)" and therefore "it is manifestly impossible to affirm (…) that the Historic Centre of Évora is classified as a National Monument" and "on the other hand, the concept of classification called National Monument in Decree 20.985 DOES NOT equate to the concept of designation of National Monument in the LBPC" (bold, underlined and capitals of the Respondent).
e) For the Respondent, "there is NO classification by UNESCO called Humanity Heritage, UNESCO Heritage, World Heritage or any equivalent expression", but only "(…) a list (…) that is in charge of the World Heritage Committee" (bold, underlined and capitals of the Respondent).
f) The Respondent reiterates that "when registering a cultural asset on the List of World Heritage, the UNESCO Cultural Heritage Committee is not classifying an asset" but "(…) recognizing that that cultural asset also constitutes a universal heritage for the protection of which the international community as a whole has a duty to cooperate (…)" (underlined by the Respondent).
g) On the other hand, the Respondent states that "the classification of a cultural asset ALWAYS depends on a prior administrative classification procedure" being that "(…) when registering the Historic Centre of Évora on the List of World Heritage, the UNESCO Cultural Heritage Committee NEVER carried out any prior administrative classification procedure (…)" (bold, underlined and capitals of the Respondent).
h) In these terms, the Respondent understands that "(…) it is necessary to conclude that the Claimant's argumentation rests on an erroneous assumption and makes an erroneous interpretation of the LBPC and, by implication, of article 44, l - n) of the TBS", therefore, "(…) in order to enjoy the exemption from Municipal Property Tax the TBS requires the individual classification of each of the properties that make up that Set".
i) Thus, for the Respondent, "it is abusive to interpret that ALL properties located within the Set are, merely because of that fact, classified and, as such, exempt from Municipal Property Tax" (bold of the Respondent).
j) Additionally, the Respondent understands, "(…) a set can never be ONE property, but rather a PLURALITY of properties", "because (…) a PLURALITY of properties which is (…) a set, is not ONE property in the fiscal sense" (capitals, bold and underlined of the Respondent).
k) And continues: being "from article 2 of the Municipal Property Tax Code that the sense of the concept of property in tax law is understood (…)", it understands that "(…) the exemption apparent in article 44 (…) of the TBS, because it can only be directed at fiscal properties (…), requires the individual classification of properties, regardless of the patrimonial category in which they fall (…)", concluding that this is "(…) the only plausible interpretation and that is in harmony with the unity of the legal system" (bold and underlined of the Respondent).
l) In these terms, the Respondent concludes that "(…) in light of all that has been set forth, it is necessary to conclude that the assessments now challenged have factual and legal support, and should therefore remain in the legal system".
m) With regard to the documentary evidence presented by the Claimant, the Respondent challenges in its Answer documents nos. 11 and 12 attached with the arbitral request, considering that the municipalities do not have "legal competence to classify assets as National Monument, Real Property of Public Interest, cultural asset of National Interest and cultural asset of Public Interest" for which reason, it concludes, "obviously the municipal authorities also do not possess any legal competence to certify the patrimonial classification of properties classified as National Monument" – original bold and italic.
n) Finally, the Respondent alleges in its Answer that "(…) the interpretation conveyed by the Claimant is contrary to the Constitution of the Portuguese Republic (…), insofar as it violates the constitutional principles: (i) of tax equality, (ii) of tax justice, (iii) of contributory capacity, (iv) of proportionality, (v) of local autonomy and (v) of participation in decision-making, (vii) in addition to organic unconstitutionality" presenting argumentation regarding the defence of the same (bold of the Respondent).
o) It concludes seeking the success of the exception of material incompetence of the Tribunal and, subsidiarily, the dismissal of the request for an arbitral pronouncement formulated by the Claimant.
Notified, on 18/01/2019, to, pursuant to the principle of adversarial procedure provided in subsection a) of article 16 of the LRTA, pronounce itself on the exception invoked by the Respondent, the Claimant responded on 01/02/2019 seeking the dismissal of the same and additionally requesting that the Arbitral Tribunal order the translation of documents attached by the Respondent with the Answer into the English language.
On 04/02/2019, the Arbitral Tribunal issued an order dismissing the request for translation of documents formulated by the Claimant and decided to dispense with the meeting referred to in article 18 of the LRTA. In the same order, the parties were granted a simultaneous period of 20 days for the presentation of Submissions.
In this order, the Parties were also notified of the deadline for the issuance of the decision, which was set at 30 April 2019, with a warning to the Claimant to, by that date, proceed with payment of the subsequent arbitral fee in accordance with the provisions of no. 3 of article 4 of the Regulation of Costs in Tax Arbitration Proceedings and to communicate such payment to CAAD.
Notified of the aforementioned order, the Respondent came to request the conducting of successive rather than simultaneous Submissions, considering that this chronological sequence is what results from the law.
On 07/02/2019, the Tribunal issued an order in which it dismissed the Respondent's request, maintaining, in its entirety, the order issued on 04/02/2019.
On 01/03/2019, both parties presented their respective Submissions in which they maintain, in essence, the positions set forth in the request for constitution of the Arbitral Tribunal and in the Answer.
On 23/04/2019, the Respondent came to request the suspension of the present proceedings until decision, with res judicata status of the Special Administrative Action, distributed under no. .../19...BEBJA in the Administrative and Tax Court of Beja.
By order dated 29/04/2019, that request was dismissed.
II. CASE MANAGEMENT
- Procedural Prerequisites
The Tribunal was duly constituted, the request for an arbitral pronouncement is timely, as it was submitted within the period provided in subsection a), of no. 1 of article 10 of the LRTA.
The parties have legal personality and capacity, have standing and are duly represented (see articles 4 and 10, no. 2 of the LRTA and article 1 of Ordinance no. 112-A/2011, of 22 March).
The proceedings do not suffer from any nullities.
- Regarding the Exception Invoked by the Tax Authority
The Respondent invoked the material incompetence of the Arbitral Tribunal to assess decisions dismissing requests for official review.
In this respect, the TCA argues, in summary, that subsection a) of article 2 of Ordinance no. 112-A/2011, of 22/3, by which it was bound to arbitral jurisdiction, excludes claims relating to the declaration of illegality of self-assessment acts that have not been preceded by recourse to the administrative avenue, as provided for in articles 131 to 133 of the CTPP, with no reference to official review as provided for in article 78 of the General Tax Law ("GTL").
For the TCA, this understanding, beyond the literal element, is imposed "by virtue of the constitutional principles of the rule of law and separation of powers (see articles 2 and 111, both of the Constitution), as well as Legality (see articles 3, no. 2, and 266, no. 2, both of the CRP), as a corollary of the principle of unavailability of tax credits implicit in article 30, no. 2 of the GTL, which bind the legislator and all activity of the Respondent" (article 46 of the Answer).
And continues:
"Effectively, the binding of the TCA to necessary arbitral protection, in which the principle of irrevocability of decisions prevails, presupposes a limitation of situations in which it can fully decide whether or not to appeal an unfavourable judicial decision, that is, the power to choose between definitively relinquishing the collection of the tax credit or adopting conduct potentially suitable to seek to enforce it" (article 50 of the Answer).
Thus, and for the Respondent, it is constitutionally forbidden, by virtue of the constitutional principles mentioned, an interpretation that expands the TCA's binding to the arbitral protection fixed by law.
The Claimant, in exercise of the adversarial procedure that was granted to it regarding the exception, defended its dismissal by invoking CAAD jurisprudence in a sense divergent to what was sustained by the TCA.
Let us examine this.
The competence of arbitral tribunals functioning at CAAD is, in the first place, determined by the subject matters indicated in no. 1 of article 2 of Decree-Law no. 10/2011, of 20 January (LRTA) according to which:
"Article 2
Competence of arbitral tribunals and applicable law
1 - The competence of arbitral tribunals comprises the assessment of the following claims:
a) The declaration of illegality of acts of tax assessment, of self-assessment, of withholding at source and of payment on account;
b) The declaration of illegality of acts of determination of taxable matter, of acts of determination of collectible matter and of acts of fixing of patrimonial values;
c) The assessment of any question, of fact or of law, relating to the draft decision of assessment, whenever the law does not ensure the ability to deduce the claim referred to in the preceding subsection."
In a second line, the competence of arbitral tribunals functioning under the aegis of CAAD is also limited by the terms in which the TCA was bound to that jurisdiction by Ordinance no. 112-A/2011, of 22 March, since article 4 of the LRTA establishes that "the binding of the tax administration to the jurisdiction of tribunals constituted pursuant to the present law depends on an ordinance of the members of the Government responsible for the areas of finance and justice, which establishes, in particular, the type and maximum value of the disputes covered".
In face of this second limitation of the competence of arbitral tribunals functioning at CAAD, the resolution of the competence question depends essentially on the terms and nature of this binding, because, even if one is faced with a situation that can be framed in that article 2 of the LRTA, if it is not covered by the binding, the possibility of the dispute being jurisdictionally decided by this Arbitral Tribunal will be ruled out. That is, "the scope (…) of arbitral proceedings is restricted to issues of the legality of acts of the types referred to in article 2 [of the LRTA] that are covered by the binding that was made in Ordinance no. 112-A/2011 (…)" - see in this sense, the Judgment of the Central Administrative Court of the South dated 28/4/2016 and issued in the scope of case 09286/16 (Anabela Russo).
Now, pursuant to subsection a) of article 2 of Ordinance no. 112-A/2011:
"The services and bodies referred to in the preceding article bind themselves to the jurisdiction of arbitral tribunals functioning at CAAD that have as their subject matter the assessment of claims relating to taxes whose administration is entrusted to them referred to in no. 1 of article 2 of Decree-Law no. 10/2011, of 20 January, with the exception of the following:
a) Claims relating to the declaration of illegality of self-assessment, withholding at source and payment on account acts that have not been preceded by recourse to the administrative avenue in accordance with articles 131 to 133 of the Code of Tax Procedure and Process" - our bold and underlined.
As is known, self-assessment is that which is carried out by a private individual, whether the taxpayer or not, as opposed to hetero-assessment which is carried out by the TCA – on this matter, in Jurisprudence, for example, the Judgment of the Supreme Administrative Court dated 15/02/2006 and issued in the scope of case 026622 (Almeida Lopes).
Now, the assessment of Municipal Property Tax does not result from any self-assessment act but rather from a hetero-assessment act, which results unequivocally from the provision in no. 1 of article 131 of the Municipal Property Tax Code according to which:
1 – The tax is assessed annually, in relation to each municipality, by the central services of the Directorate-General for Taxes, based on the patrimonial values subject to taxation of the properties and in relation to the taxable persons that appear in the property rolls on 31 December of the year to which it relates.
In light of the above, the invocation of subsection a) of article 2 of Ordinance no. 112-A/2011, of 22 March, in the case at hand appears to be incorrect.
On the other hand, it is settled jurisprudence today that, the TCA being able, on its own initiative, to proceed with the official review of the tax act within four years after assessment or at any time if the tax has not yet been paid, on the ground of error attributable to the services (article 78, no. 1, of the GTL), the taxpayer can also, in that period of official review, request this same review on that ground – see, merely by way of example, the Judgment of the Supreme Administrative Court dated 05/11/2014 and issued in the scope of case 01474/12 (Pedro Delgado).
It is also settled in Doctrine and Jurisprudence the classification of Review of Tax Act as an alternative means to the assessment of the legality of tax acts. In fact, as was stated in the Judgment of the Supreme Administrative Court dated 3 June 2015 and case no. 0793/2014 (Aragão Seia): "(…) the procedural means of review of the tax act cannot be considered as an exceptional means to react against the consequences of an assessment act, but rather as an alternative means to administrative and contentious challenge means (when used at a time when those can still be used) or complementary to them (when the periods for using the challenge means of the assessment act have already been exhausted) (…)".
In this sense, concludes that Court, "the dismissal, tacit or express, of the review request is subject to judicial review [see art. 95, nos. 1 and 2, subsection d), of the GTL]". Thus and being subject to judicial review and not falling within the exceptions provided for in article 2 of Ordinance no. 112-A/2011, of 22 March, one must conclude that Arbitral Tribunals constituted under the aegis of CAAD are also competent to assess decisions dismissing requests for official review that assess the legality, either of self-assessment acts or of additional assessment acts – expressly in this sense, the Judgment of the Central Administrative Court of the South dated 27/04/2017 and issued in case no. 08599/15 (Cristina Flora).
On the other hand, in the case at hand, there is not even the obstacle to competence that might exist if the decision on the Review of Tax Act request did not involve assessment of the legality of the additional assessment act.
In fact, if the decision of official review were limited to assessing whether the prerequisites for the use of the procedural means provided for in article 78 of the GTL were met, one would be faced with an act in tax matters that did not assess the legality of an assessment act, whose legality could not be assessed in a judicial challenge process, as results from subsection d) of no. 1 of article 97 of the Code of Tax Procedure and Process and, consequently, could not be assessed in an arbitral process, whose field of application is limited to that of the judicial challenge process.
However, that is not what occurred because, in casu, and as stands out from the order that dismissed the request for Review of Tax Act, the Tax and Customs Authority did not limit itself to verifying whether the prerequisites on which the possibility of review depends were fulfilled and even expressly declared that those prerequisites were met.
For the reasons set out, it is clear that the TCA is bound to disputes, like the sub judice one, in which the legality of assessment acts is discussed.
As for the principle of unavailability of tax credits, it can be said that this constitutes a command directed to the Tax Authority constituting "a legal limit" to its actions.
The Arbitral Tribunal, like any Judicial Tribunal, is bound by the principle of legality (as indeed results expressly from no. 2 of article 2 of the LRTA) and its decisions are "interpretive judgments bound by the law".
Now, when deciding on its competence, relevant only as a procedural prerequisite, the Arbitral Tribunal is not practising any act of disposition of any tax credit, and therefore the invoked exception is not well-founded – in this sense, in CAAD jurisprudence, for example, the decisions issued in Cases nos. 143/2016-T (Fernanda Maças); 46/2017-T (Jorge Lopes de Sousa) and 473/2017-T (Fernanda Maçãs).
In light of the above, and in conclusion, the exception of incompetence raised by the Respondent fails.
III. GROUNDS
A. FACTUAL GROUNDS
§ 1. Proven Facts
A. In the year 2013, the Claimant was the owner of the following properties:
(i) Land for construction, identified by the property matrix article no. ..., of the Union of Parishes of ..., located at ..., no. ..., in Évora, with the Patrimonial Value Subject to Taxation of €728,878.90 (see docs. nos. 2 to 4 and 5 of the request for Constitution of the Arbitral Tribunal);
(ii) Property in the regime of horizontal property ownership, identified with property matrix article no. ..., independent unit B, of the Union of Parishes of ..., located at ..., no. ..., in Évora, with the Patrimonial Value Subject to Taxation of €947,612.16 (see docs. nos. 2 to 4 and 6 of the request for Constitution of the Arbitral Tribunal);
(iii) Property in the regime of horizontal property ownership, identified with property matrix article no. ..., independent unit D, of the Union of Parishes of ..., located at ..., no. ..., in Évora, with the Patrimonial Value Subject to Taxation of €57,280.00 (see docs. nos. 2 to 4 and 7 of the request for Constitution of the Arbitral Tribunal);
(iv) Property in the regime of horizontal property ownership, identified with property matrix article no. ..., independent unit E, of the Union of Parishes of ..., located at ..., no. ..., ...-... Évora, with the Patrimonial Value Subject to Taxation of €77,840.00 (see docs. nos. 2 to 4 and 8 of the request for Constitution of the Arbitral Tribunal); and
(v) Property in full ownership without storeys or divisions capable of independent use, identified with property matrix article no. ..., of the Union of Parishes of ..., located at Street ..., nos. ... to ..., Évora, with the Patrimonial Value Subject to Taxation of €5,515,719.71 (see docs. nos. 2 to 4 and 9 of the request for Constitution of the Arbitral Tribunal).
B. The Historic Centre of Évora is included in the list of national assets included in the UNESCO world heritage list – see Notice of the Directorate of Cultural Services, dated 20 January 1988 and published in the Official Gazette, no. 39/1988, I Series, of 17 February 1988.
C. The aforementioned properties, located at ..., nos. ... to ... and at Street ..., nos. ... to ..., in Évora, are included in the ensemble classified as Cultural Heritage of Humanity by UNESCO (see docs. nos. 11 and 12 attached with the request for Constitution of the Arbitral Tribunal);
D. The Claimant was notified to proceed with payment of the first, second and third instalments of the Municipal Property Tax assessment relating to the year 2013, in the amounts of €11,734.89, €11,734.88 and €11,734.88, and with payment deadlines of April, July and November 2014, respectively (see docs. nos. 2 to 4 attached with the request for Constitution of the Arbitral Tribunal);
E. The Claimant proceeded with payment of those assessment acts, respectively, on 24 April 2014, on 28 July 2014 and on 27 November 2014 (see docs. no. 13 to 15 attached with the request for Constitution of the Arbitral Tribunal);
§ 2. Facts Not Proven
With relevance for the assessment and decision of the case, there are no facts that have not been proven.
§ 3. Grounds Regarding Factual Matters
The Tribunal's conviction was based on the facts alleged by the Parties and documents attached, whose veracity was not called into question, as well as on the administrative file.
B. LEGAL GROUNDS
§ 1. Delimitation of Issues to be Decided
In light of the above, the main issue to be decided is whether the tax assessment acts for Municipal Property Tax relating to the year 2013 are, or are not, illegal. For this purpose, it is important to analyse whether the properties in question are classified, or are not, as "National Monuments" as a result of being inserted in the ensemble designated as "Historic Centre of Évora", considered World Heritage by UNESCO in 1986 and whether, for that reason, such property meets the prerequisites established in law to benefit from the exemption from Municipal Property Tax enshrined in subsection n) of no. 1 of article 44 of the TBS.
§ 2. Assessment
In the case at hand, the only issue is whether the exemption from Municipal Property Tax provided for in subsection n) of article 44 of the TBS can be applied to the properties subject to the present proceedings, according to which:
"1 - The following are exempt from municipal property tax:
n) Properties classified as national monuments and properties individually classified as of public interest, of municipal value or cultural heritage, in accordance with the applicable legislation".
It should be noted that, as results from the proceedings, the properties in question were not individually classified, nor is this alleged by the Claimant, so the exemption, if applicable, will derive from the first part of that norm which refers to 'properties classified as national monuments'.
It should be noted that the issue sub judice is not new and has been the subject of several decisions, both at CAAD and in the Administrative and Tax Courts and, even, as will be seen, of Superior Courts. The majority of Jurisprudence points towards the success of the Claimant's request and, de iure constituto, we see no reason to deviate from this interpretative line.
On this matter, it was recently written in Judgment no. 46/2017-T (Jorge Lopes de Sousa):
"The Tax and Customs Authority argues that this reference concerns properties that were classified as national monuments under the legislation in force before Law no. 107/2001, of 8 September, as this provides for the category of national monument, but not for classification as national monument, in nos. 1 and 2 of article 15.
However, no. 5 of article 44, in the wording of Law 3-B/2010, of 28 April, makes reference to the 'communication of classification as national monuments', clearly referring to communications that are to occur after its entry into force, so this expression should be interpreted as referring to immovable assets to which the designation of 'national monument' is assigned. In fact, this communication was not provided, in these terms, in the previous wording, so it would not be understood that it was referring to communications relating to monuments classified before the entry into force of Law no. 107/2001, more than nine years before."
And continues: "In this context, if the legislature intended to refer only to monuments classified before Law no. 107/2001, it would certainly make an express reference. In its absence, and given that it is to be presumed that the legislator knew how to express his thinking in adequate terms (article 9, no. 3, of the Civil Code), one must conclude that the first part of the exemption mentioned covers properties classified as national monuments that were not the subject of individual classification.
Moreover, in the same line, article 53, no. 1, of Law no. 107/2001 refers to the 'act that decrees the classification of monuments', so it is unequivocal that, under this law, there is 'classification of monuments'.
Therefore, the initial part should be interpreted as referring to 'properties classified as national monuments' under Law no. 107/2001, inclusive.
And, as 'national monuments' should be considered all 'immovable assets classified as of national interest, whether they are monuments, ensembles or sites', since article 15, no. 3, of Law no. 107/2001 and article 3 of Decree-Law no. 309/2009, of 23 October, explicitly assign them this designation. That is, they are 'properties classified as national monuments' for purposes of the initial part the properties to which this designation is assigned.
Given that 'properties individually classified as of public interest or municipal interest' are explicitly referenced in that subsection n) of no. 1 of article 44 of the TBS, the useful scope of the initial reference to 'properties classified as national monuments' will consist in extending the exemption to properties that are the subject of non-individual classification, namely those included in 'monuments, ensembles or sites', referred to in no. 3 of article 15 of Law no. 107/2001, to which the designation of 'national monument' is assigned, which is used in subsection n) of no. 1 of article 44 of the TBS.
'Immovable assets included in the list of world heritage integrate, for all purposes and in their respective category, the list of assets classified as of national interest', by virtue of the provision in no. 7 of article 15 of Law no. 107/2001.
Thus, from the entry into force of this Law, the inclusion of immovable assets in the list of world heritage has the consequence of their classification as of national interest, from then on integrating, for all purposes, the list of assets classified as of national interest, which amounts to them coming to be considered assets classified as of public interest, without the need for any other classification act, and having the designation of 'national monuments'.
In this context, the opening of a classification procedure that implies the inclusion of an immovable asset in the indicative list of world heritage, in accordance with no. 1 of article 72 of Decree-Law no. 309/2009, of 23 October, does not aim to assess whether the conditions for classification are met, nor the issuance of a final decision by the Government, in accordance with article 30, no. 1, of the same law (as the classification is already made 'for all purposes' by virtue of no. 7 of article 15 of Law no. 107/2001), but only to identify which are the immovable assets that have been included in that list, namely through a location plan, and to fix the respective special protection zone.
It is in this context that, with regard to immovable assets registered on the world heritage list at the date of entry into force of Decree-Law no. 309/2009, provision is made, in no. 3 of its article 72, only for publication in the form of a notice in the Official Gazette, of the location and siting plan of the immovable asset registered on the world heritage list, including the respective protection zone and not a decision of the Government in the form of a decree, as provided for in its article 30, no. 1, for final decisions of processes for classifying immovable assets as of national interest.
Thus, with regard to immovable assets registered on the world heritage list before the entry into force of Decree-Law no. 309/2009, there is no place for any classification act, and they are integrated 'for all purposes and in their respective category, the list of assets classified as of national interest', by virtue of no. 7 of article 15 of Law no. 107/2001.
For this reason, with regard to these immovable assets registered on the world heritage list, there is no place for the 'communication of classification as national monuments (…) to be carried out by the Institute for Management of Architectural and Archaeological Heritage, I. P.' referred to in no. 5 of article 44 of the TBS, as there is no place for a classification to communicate.
Thus, in these cases, the exemption operates automatically, following the publication of the notice provided for in article 72, no. 3, of Decree-Law no. 309/2009.
However, the exemption in question covers only 'properties classified as national monuments', those that have the designation of 'national monument', whether monuments, ensembles or sites, in the terms in which such categories are defined in international law (articles 2, no. 1, and 3, no. 2, of Decree-Law no. 309/2009).
In the case at hand, it follows from documents 11 and 12, whose authenticity is not contested in the proceedings – note that the TCA only calls into question the competence of the Évora Municipal Council to attribute the classification of "monument" (see § 218 to § 223 of the Answer) that, geographically, the properties subject to the present proceedings are located within the so-called "Historic Centre of Évora" and, consequently, for the reasons set out above, such properties assume the nature of 'national monuments', benefiting, therefore, from the exemption provided for in subsection n) of no. 1 of article 44 of the TBS.
On this matter, the decisions of CAAD in cases nos. 325/2014-T (Luis Menezes Leitão), 76/2015-T (Maria Antónia Torres), 33/2016-T (Paulo Ferreira Alves), 98/2016-T (Magda Feliciano), 379/2016-T (Hélder Faustino) and 534/2016-T (Maria Antónia Torres) have already pronounced themselves.
In the same sense, the Judgment of the Central Administrative Court of the North dated 07/12/2016 and issued in the scope of case 00134/14.4BEPRT (Ana Patrocínio) where it was concluded:
"1 - The following are exempt from municipal property tax: properties classified as national monuments and properties individually classified as of public interest or municipal interest, in accordance with the applicable legislation – see article 44, no. 1, subsection n) of the Tax Benefits Statute.
2 - Immovable assets situated in Historic Centres included in the UNESCO World Heritage List are classified as being of national interest, falling within the category of 'national monuments' – see article 15, nos. 3 and 7 of Law no. 107/2001, of 8 September.
3 - Properties included in the Historic Centres Classified benefit from exemption from municipal property tax."
In the same sense, and from the same Court, see the Judgment dated 01 June 2017 and issued in the scope of case 00693/14.1BEPRT (Mário Rebelo) where it was concluded:
1 - Immovable assets situated in Historic Centres included in the UNESCO World Heritage List are classified as being of national interest, falling within the category of 'national monuments' – see article 15, nos. 3 and 7 of Law no. 107/2001, of 8 September.
2 - The following are exempt from municipal property tax: properties classified as national monuments and properties individually classified as of public interest or municipal interest, in accordance with the applicable legislation – see article 44, no. 1, subsection n) of the Tax Benefits Statute.
The Central Administrative Court of the South has also pronounced on this matter concluding, in a Judgment dated 8 June 2017 and issued in the scope of case no. 09284/16 (Jorge Cortês):
"The insertion of a property in a site classified as a national monument determines exemption from Municipal Property Tax, conferred by the provision of article 44/1/n) of the TBS, without the need for further individualized classification thereof."
In the same sense, see the recent Judgment of the Supreme Administrative Court dated 12/12/2018 and issued in the scope of case no. 0134/14.4BEPRT 0501/17 (Aragão Seia) where it was written:
"As easily appears from reading the contents of this letter, the TCA understood that to the appellant's properties applied the innovative rules of the 2007 Budget Act and, to that extent, the exemption had ceased ope legis which had previously been granted since the said properties were not individually classified.
However, such understanding, as we have seen, would only be correct if the appellant's properties, despite benefiting from the tax exemption, were not covered by prior classification designated as national monument.
On 12.11.2003 the appellant's request relating to the exemption from Municipal Contribution for both properties was granted, and exemption was granted for a period of 7996 years, running between 2004 and 9999 inclusive, that is, exemption was granted for an unlimited period, provided the prerequisites of the exemption granted remained current.
As such exemption was granted because the said properties were integrated in the Historic Centre of Porto which is part of the world heritage list and, therefore, integrated in the group of the so-called national monuments, see points 1 and 2 of the matter of fact and article 15, nos. 3 and 7 of Law no. 107/2001, of 08.09, they did not need, given the 'new' wording of article 40, no. 1, subsection n) of the TBS, or subsequently, any individual classification, so, to that extent, the tax act practised is unjustified" (the underline is ours).
The Respondent invokes that the interpretation sustained here violates the constitutional principles "(i) of tax equality, (ii) of tax justice, (iii) of contributory capacity, (iv) of proportionality, (v) of local autonomy and (v) of participation in decision-making, (vii) in addition to organic unconstitutionality".
Let us examine whether it is right.
The principles of tax equality, tax justice, contributory capacity and proportionality (which the respondent reduces to the principle of equality as results from § 283 of the Answer), can be analysed together to the extent that they are intrinsically connected.
Thus, the principle of equality, enshrined in article 13 of the Constitution of the Portuguese Republic ("CRP") requires that equal treatment be given to what is essentially equal and that different treatment be given to what is essentially different. In fact, the principle of equality, understood as an objective limit on legislative discretion, does not prohibit the law from adopting measures that establish distinctions. It does, however, prohibit the creation of measures that establish discriminatory distinctions, that is, inequalities of treatment that are materially unfounded or without any reasonable, objective and rational foundation. The principle of equality, as a binding principle of law, is translated into a general idea of prohibition of arbitrariness [in this sense, for example, the Judgment of the Constitutional Court no. 409/99, dated 26/06/1999 and issued in Case no. 793/97 (Vitor Nunes de Almeida)].
The principle of contributory capacity, on the other hand, is characterized consensually by doctrine and jurisprudence of the Constitutional Court as a structuring principle of the tax system, which expresses and concretizes the principle of tax equality, and which has implicit basis in the "Fiscal Constitution" by virtue of articles 103 and 104 of the CRP, as well as in Portuguese Tax Law in article 4 of the General Tax Law ("GTL").
The principle of contributory capacity is translated into the capacity that the subject demonstrates to contribute in the tax sphere, whether through the income he earns or through the wealth he possesses. In order for the tax to correspond to the economic power of the taxpayer, it is necessary that it also falls on manifestations of wealth. But not only that: a tax will only be in accordance with the principle of contributory capacity when it falls on wealth in a determined manner, which reflects the real economic power of the taxpayer and the resources that his personal and family life leaves him available to pay tax. It is necessary for the tax to fall on economically relevant realities, which can be summarized synthetically as income, wealth and consumption, and it must be excluded that realities devoid of economic value are taxed.
As the Constitutional Court has stated, the principle of contributory capacity, although not expressly enshrined in the Constitution, is nothing more than "the (qualified) expression of the principle of equality, understood in a material sense, in the domain of taxes, that is, equality in tax". And, in that sense, it constitutes the tax corollary of the principles of equality and tax justice and from which a command flows to the ordinary legislator to structure the tax system with a view to the contributory capacities of each.
In such a framework, the idea of justice in tax matters has traditionally been reduced to three more or less distinct principles, such as the principle of legality, the principle of generality and the principle of contributory capacity.
Now, tax benefits assume an exceptional character (it is the Tax Benefits Statute itself that refers to this in no. 1 of article 2) and constitute policy instruments that aim at certain economic-social objectives or other purposes that justify their exceptional character in relation to normality.
They are, therefore, "exceptions to taxation-rule, with extrafiscal grounds of public interest, constitutionally relevant, and superior or protected with the very taxation they prevent.
In fact, one can even affirm that the public interest that founds the tax benefit, derrogating the constitutional principles of generality, fiscal isonomy and contributory capacity, is, from a legal point of view, superior to the public interest underlying the taxation itself".
In other words, any tax benefit alters the balance in the distribution of the tax burden by treating citizens unequally, thus derrogating the principle of equality.
With regard to this matter, the Constitutional Court has decided that "in the matter of tax benefits, there are also relevant equality requirements to be respected. Thus, the different legislative treatment regarding exemption should not be arbitrary or purely discriminatory, but, on the contrary, should be based on a sufficiently rational foundation derived from the structurally different nature of the legal situations involved".
In this way, only those choices of regime made by the ordinary legislator in those cases in which it is proved that they result in differences of treatment between persons that do not find justification in reasonable, perceptible or intelligible grounds, having regard to the constitutional purposes pursued with the measure of the difference, can be constitutionally censured on the grounds of violation of the principle of equality.
Now, in the case at hand, and notwithstanding the considerations made by the Respondent (which, for the reasons invoked, can only be appreciated de iure condendo), the truth is that the exemption in question cannot be considered arbitrary or discriminatory insofar as it is based on distinct situations: properties classified as "national monuments" are distinct from properties that do not have that classification. And this is so regardless of the reason why they assume that classification.
In this sense, there is no violation, in casu, of the principles of tax equality, tax justice and contributory capacity.
The Respondent also states that the interpretation propounded by the Claimant (and confirmed by this Arbitral Tribunal) suffers from violation of the principle of proportionality.
However, after analysing the argumentation set out in this respect in the Answer (see §279 to 283), the Respondent's argumentation is reduced to an alleged violation of the principle of equality (see §279 to 283 of the Answer), a matter which, moreover, has already been analysed above.
But it will also be said that subsection n) of no. 1 of article 44 of the TBS and the interpretation adopted here does not also violate the principle of proportionality (in the strict sense).
Effectively, and as Maria Lúcia Amaral refers, "when we speak of prohibition of excess, or of the principle of proportionality in the broad sense, we essentially mean the following. The decisions that the State makes, precisely because they cannot be unlimited or arbitrary, must have, each and every one of them, a certain purpose or a certain reason for being. This purpose, pursued by each state decision, must be for its recipients – as for any member of the legal community – something detectable, denominable and understandable. It is evident that the State, whenever it acts, seeks the best realization of public interest. But such is not sufficient: what is necessary is that, before each decision, one can understand the specific manner in which, in that case, it wished to pursue the interest of all. That is precisely what we mean when we refer to the 'purpose' or 'reason for being' of each state decision and to the necessity of its intelligibility."
Now, continues the author, "what the principle of prohibition of excess postulates is that between the content of the state decision and the purpose it pursues there is always an equilibrium, a weighing and a 'just measure' (…) the advantages (obtained by all) through the state measure must be proportional to the disadvantages that such measure may have caused to some members of the legal community, such that the weight of the public decision never exceeds the quantum required by the pursuit of its purpose."
The prohibition of excess (or proportionality in the broad sense) therefore stands out as a general principle of limitation of public power.
Now, for the reasons already mentioned, one does not perceive, in the case at hand, any disproportionality in the norm or in the interpretation worthy of Constitutional protection.
As regards the alleged violation of the principle of local autonomy and participation, the Respondent argues that "the argumentation conveyed by the Claimant represents a violation of the principle of local autonomy, insofar as it results in the conferral of a tax benefit without any criterion, with obvious prejudice to municipal revenues, (…)" since the Municipal Property Tax is a municipal revenue, and the municipality of Évora had "no say" in the loss of revenue associated, for which reason it considers articles 235, 238 and 268, no. 3 of the CRP violated (see § 285 and 286 of the Answer).
Local autonomy is intimately connected to the general constitutional principle of the unity of the State and, read in context with regional autonomy, the principle of subsidiarity and administrative decentralization.
This principle has received developed jurisprudential treatment by the Constitutional Court.
If we understand the Respondent's allegation correctly, it calls into question fiscal autonomy (articles 238, no. 4 and 254 of the CRP).
Now, pursuant to article 238 of the CRP:
"1. Local authorities have their own assets and finances.
-
The system of local finances shall be established by law and shall aim at the fair distribution of public resources between the State and local authorities and the necessary correction of inequalities between local authorities of the same level.
-
The own revenues of local authorities shall include, necessarily, those from the management of their assets and those charged for the use of their services.
-
Local authorities may have tax powers, in the cases and terms provided by law."
On the other hand, pursuant to no. 2 of article 254 of the CRP, "Municipalities shall have their own tax revenues, in accordance with the law."
Both norms are concretized, for what is of interest to the present proceedings, by the Law which establishes the financial regime of local authorities and intermunicipal entities (Law no. 73/2013, of 3 September) which, in subsection a) of article 14 defines, as revenue of the municipalities, "the product of the collection of the municipal property tax".
Subsuming the aforesaid principle to the case sub judice, it is not clear how the interpretation sustained in the present proceedings can violate the principle of local autonomy. In fact, there is no intention whatsoever to call into question the allocation of Municipal Property Tax revenue to the municipality of Évora. What is at issue in the present proceedings, it is stressed, is only the interpretation and scope of a tax benefit (here understood latu sensu) whose contours were legally defined. It must not be forgotten that the creation of taxes (incidence, rate, tax benefits and taxpayer guarantees) and the tax system are within the exclusive competence of the Assembly of the Republic [articles 103, no. 2 and 165, no. 1, subsection i) of the CRP].
The alleged violation of the principle of local autonomy therefore fails.
The alleged violation of the "principle of participation (article 268/3 of the CRP)" is also not well-founded (§ 288 of the Answer). In fact, the Respondent does not specify in what way it considers the aforesaid principle violated, nor is it clear how such violation could have occurred.
The same applies to the alleged "organic unconstitutionality", in which it is not possible, due to lack of sufficient specificity, to understand the Respondent's allegation. One is faced, in the case at hand, with an exercise in legal interpretation of legislative instruments whose approval followed the legal-constitutional framework in force, so the alleged defect does not exist.
§ 3. Regarding Reimbursement of the Amount Paid and Payment of Compensatory Interest
As results from the established factuality, the Claimant proved the payment of the values contained in the disputed tax assessment acts and petitions, as a consequence of the annulability thereof, the condemnation of the TCA to reimbursement of the amount unduly paid, in the total amount of €35,204.65, plus the respective compensatory interest.
As results from the above, the Claimant indeed bore a tax obligation superior to what was legally due.
Article 24, no. 1, subsection b), of the LRTA provides that the arbitral decision on the merits of the claim for which there is no appeal or challenge binds the Tax Administration from the end of the period provided for appeal or challenge, the latter being required, in the exact terms of the success of the arbitral decision in favour of the taxable person, and until the end of the period provided for spontaneous execution of the decisions of the Tax Tribunals, to restore the situation that would exist if the tax act that is the subject of the arbitral decision had not been practised, by adopting the acts and operations necessary for the effect, which is in accordance with the provisions of article 100 of the GTL (applicable ex vi subsection a) of no. 1 of article 29 of the LRTA) which establishes that "the tax administration is obliged, in case of total or partial success of a complaint, judicial challenge or appeal in favour of the taxable person, 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 appropriate, from the end of the period for execution of the decision".
Although article 2, no. 1, subsections a) and b), of the LRTA uses the expression "declaration of illegality" to define the competence of arbitral tribunals functioning at CAAD, making no reference to condemnatory decisions, it should be understood that the powers which in judicial challenge proceedings are attributed to tax tribunals are included in their competencies, and this is the interpretation that best fits the legislative authorization that gave rise to the LRTA, in which it is proclaimed, as a first principle, that «the tax arbitration process must be an alternative procedural means to the judicial challenge process and to the action for recognition of a right or legitimate interest in tax matters».
The judicial challenge process, although it is essentially a process of annulment of tax acts, admits the condemnation of the Tax Administration in the payment of compensatory interest, as is deduced from what is established in article 43, no. 1, of the GTL and in article 61, no. 4, of the CTPP.
Thus, no. 5 of article 24 of the LRTA, by establishing that "payment of interest, regardless of its nature, is due, in accordance with the terms provided in the general tax law and the Code of Tax Procedure and Process", should be understood as allowing the recognition of the right to compensatory interest in the arbitral process.
On the other hand, depending the right to compensatory interest on the right to reimbursement of amounts paid unduly, which are its basis for calculation, inherent in the possibility of recognition of the right to compensatory interest is the possibility of assessment of the right to reimbursement of those amounts.
In light of the above, it falls to assess the request for reimbursement of the amount unduly paid and payment of compensatory interest.
Articles no. 1 of article 43 of the GTL and article 61 of the CTPP provide that compensatory interest is owed when it is determined in a gracious complaint or judicial challenge, that there was error attributable to the services of which results the payment of tax debt in an amount higher than what is legally due.
Error attributable to the administration is considered when the error is not attributable to the taxpayer and is based on erroneous factual assumptions that are not the responsibility of the taxpayer.
Now, as results from the contested tax acts, an obligation to pay tax in an amount higher than what would be due, compensatory interest is owed under the legally provided terms, the legislator presuming, in these cases in which assessment annulment is verified, that there occurred in the sphere of the taxpayer a prejudice by virtue of having been deprived of the patrimonial amount that he had to hand over to the State by virtue of an illegal assessment. Consequently, the taxpayer has the right to this indemnification, regardless of any allegation or proof of prejudice suffered.
In the present case, it is unquestionable that, following the establishment of the illegality of the disputed assessment acts, there will be place for reimbursement of the tax by virtue of the provision in no. 1 of article 43 of the GTL, and article 100 of the GTL, necessarily passing through the restoration of the "situation that would exist if the tax act that is the subject of the arbitral decision had not been practised".
Likewise, it is clear that there is no doubt that the illegality of the act is attributable to the Tax Authority, which autonomously practised it illegally.
As for the concept of "error", it has been understood that only in cases of annulments based on defects relating to the tax legal relationship will there be place for payment of compensatory interest, such right not being recognized in the case of annulments due to procedural or formal defects.
Accordingly, and as the present case results from a defect of violation of substantive law, which is embodied in error in the legal prerequisites, attributable to the Tax Authority, the Claimant has the right to compensatory interest counted from the payment of the tax until the full reimbursement of the aforementioned amount.
IV. DECISION
In light of the above, this Arbitral Tribunal decides:
-
To find the claim formulated by the Claimant in the present tax arbitration proceedings well-founded regarding the illegality of the order dismissing the Official Review procedure filed against the Municipal Property Tax assessment acts nos. 2013..., 2013... and 2013..., dated 05/03/2014 relating to the first, second and third instalments of the year 2013, and likewise, the aforementioned Municipal Property Tax assessment acts;
-
To find the claim condemning the Tax and Customs Authority to reimburse the Claimant the amount of tax paid, plus compensatory interest in accordance with the law, from the date on which such payment was made until the date of full reimbursement thereof, well-founded;
-
To condemn the Tax and Customs Authority in the payment of the costs of the present proceedings.
VALUE OF THE CASE
In accordance with the provisions of articles 306, no. 2, of the CPC, 97-A, no. 1, subsection a), of the CTPP and 3, no. 2, of the Regulation of Costs in Tax Arbitration Proceedings, the value of the case is set at €35,204.65 (thirty-five thousand, two hundred and four euros and sixty-five cents).
COSTS
Costs in the amount of €1,836.00 in accordance with Table I attached to the RCPAT, and with the provisions of articles 12, no. 2 and 22, no. 4 of the LRTA, 4, no. 5 of the Regulation of Costs in Tax Arbitration Proceedings and 527, nos. 1 and 2 of the Code of Civil Procedure, ex vi article 29, no. 1, subsection e) of the LRTA.
Lisbon, 30 April 2019.
The Arbitrator,
Isaque Marcos Lameiras Ramos
Text prepared by computer, in accordance with article 131, no. 5 of the CPC, applicable by reference to article 29, no. 1, subsection e) of the LRTA.
The wording of the present arbitral decision is governed by the spelling prior to the Orthographic Agreement of 1990.
Frequently Asked Questions
Automatically Created