Process: 47/2017-T

Date: July 21, 2017

Tax Type: IMT Selo

Source: Original CAAD Decision

Summary

This CAAD arbitration case (Process 47/2017-T) addresses the constitutional validity of retroactive tax conditions imposed on Real Estate Investment Funds for Residential Rental (FIIAH). The fund manager challenged IMT assessment €10,281.88 and Stamp Duty €2,108.00, arguing that Law 83-C/2013 Article 236 unconstitutionally applied new rental requirements to properties acquired before January 1, 2014. Originally, Article 8 of Law 64-A/2008 granted unconditional IMT and Stamp Tax exemptions for FIIAH acquisitions of urban properties intended for permanent residence rental. However, Law 83-C/2013 introduced paragraphs 14-16, requiring properties to be rented within three years to maintain exemptions. Article 236 retroactively applied this three-year condition to pre-2014 acquisitions, calculating the period from January 1, 2014. The petitioner argued this violated Article 103(3) of the Portuguese Constitution, which prohibits retroactive tax legislation. The fund contended that exemptions granted at acquisition constituted crystallized acquired rights in their legal sphere, not subject to subsequent resolutive conditions. Since the property was not rented within the three-year window, the Tax Authority assessed the taxes. The arbitration centered on whether imposing post-acquisition conditions on previously unconditional exemptions violates constitutional non-retroactivity principles and whether such exemptions constitute vested rights immune from legislative modification. This case has significant implications for FIIAH taxation, acquired rights doctrine in Portuguese tax law, and constitutional limits on retroactive fiscal legislation affecting investment funds structured under special tax regimes.

Full Decision

ARBITRAL DECISION

REPORT

  1. A…, S.A, taxpayer no. …, with registered office at …, no. …- …, … -… Lisbon, in its capacity as manager of the real estate investment fund "B…-CLOSED REAL ESTATE INVESTMENT FUND FOR RESIDENTIAL RENTAL", registered with the Securities Market Commission, with tax identification number … (hereinafter referred to as the Petitioner), filed on 16-01-2017 a request for establishment of a singular arbitral tribunal, pursuant to the provisions of article 2(1)(a) and articles 10(1) and 10(2), both of Decree-Law no. 10/2011, of 20 January (hereinafter referred to as RJAT), in which the Tax and Customs Authority is required (hereinafter referred to as AT or Respondent), with a view to the declaration of nullity, or alternatively, the annulment of the tax assessment acts no. … of Municipal Tax on Paid Property Transfers (IMT) in the amount of €10,281.88, and Stamp Duty (IS) item 1.1. no…, in the amount of €2,108.00, requesting reimbursement of the amounts of taxes paid, plus indemnity interest.

  2. The request for establishment of the Singular Arbitral Tribunal was accepted by the Honourable President of the CAAD, and notified to the Respondent on 20-01-2017.

  3. Pursuant to the provisions of article 6(2)(a) of the RJAT, by decision of the Honourable President of the Deontological Council of the CAAD, duly notified to the parties, within the prescribed periods, the signatory was designated as arbitrator, who communicated to the Deontological Council and to the Administrative Arbitration Centre (CAAD) the acceptance of the assignment within the period stipulated in article 4 of the Deontological Code of Administrative Arbitration.

  4. On 06-03-2017, the parties were notified of this designation, having manifested no desire to refuse the same, pursuant to the combined provisions of article 11(1), articles (a) and (b) of the RJAT, and articles 6 and 7 of the Deontological Code.

  5. The Singular Arbitral Tribunal was established on 21-03-2017, in accordance with the prescription of article 11(1)(c) of the RJAT, as amended by article 228 of Law no. 66-B/2012, of 31 December.

  6. Duly notified to do so, on 04-05-2017, the Respondent submitted its response.

  7. An arbitral order was issued on 07-05-2017, duly notified to the parties, which justified the exemption from the meeting referred to in article 18 of the RJAT, invited the parties to submit their arguments in writing, and set the deadline for issuance and notification to the parties of the arbitral decision.

  8. On 16-05-2017, the Petitioner submitted its written arguments.

  9. On 26-05-2017 the Respondent submitted its arguments, wherein it essentially refers to its response pleading.

  10. On 27-06-2017, the Petitioner, following an arbitral order of 14-06-2017, submitted the deed of purchase and sale concerning the acquisition of the real property in question and the IMT assessment note.

  11. In support of its request, the Petitioner invoked, in summary, and with relevance, for what matters here, the following (mentioned mainly by transcription):

i- Law no. 64-A/2008, of 31 December (State Budget for 2009), which approved the special regime applicable to real estate investment funds for residential rental (FIIAH) and real estate investment companies for residential rental, established in article 8 the tax regime applicable to FIIAH,

ii. having defined in paragraph 7 of the aforesaid article 8 that:

"The following are exempted from IMT:

a) Acquisitions of urban real estate or autonomous fractions of urban real estate intended exclusively for rental for permanent residence, by the investment funds referred to in paragraph 1;

b) acquisitions of urban real estate or autonomous fractions of urban real estate intended for permanent and personal residence, as a result of the exercise of the purchase option referred to in paragraph 3 of article 5 by the tenants of the real properties that form part of the assets of the investment funds referred to in paragraph 1",

iii. Law no. 83-C/2013, of 31 December added to article 8 of the Tax Regime of FIIAH paragraphs 14 to 16, with the following text:

"14. For the purposes of the provisions of paragraphs 6 to 8 it is considered that urban real properties are intended for rental for permanent residence whenever they are the subject of a rental contract for permanent residence within three years from the moment they came to form part of the fund's assets, with the taxpayer required to communicate and provide proof to the AT of the respective actual rental within 30 days following the end of the said period.

  1. When the real properties have not been the subject of a rental contract within the three-year period provided for in the preceding paragraph, the exemptions provided for in paragraphs 6 to 8 shall cease to have effect, in which case the taxpayer shall request the AT, within 30 days following the end of the said period, the assessment of the respective tax.

  2. If the real properties are disposed of, with the exception of the cases provided for in article 5, or if the FIIAH is subject to liquidation, before the period provided for in paragraph 14 has elapsed, the taxpayer shall likewise request the AT, prior to the disposal of the real property or the liquidation of the FIIAH, the assessment of the tax due pursuant to the preceding paragraph",

iii. Law no. 83-C/2013, of 31 December, further established in its article 236 the following transitional regime:

"1. The provisions of paragraphs 14 to 16 of article 8 of the special regime applicable to FIIAH and SIIAH, approved by articles 102 to 104 of Law no. 64-A/2008, of 31 December, shall apply to real properties acquired by FIIAH from 1 January 2014.

  1. Notwithstanding the provisions of the preceding paragraph, the provisions of paragraphs 14 to 16 of article 8 of the special regime applicable to FIIAH and SIIAH, approved by articles 102 to 104 of Law no. 64-A/2008, of 31 December, shall equally apply to real properties acquired by FIIAH before 1 January 2014, with the three-year period provided for in paragraph 14 being calculated, in such cases, from 1 January 2014"

iv. based exclusively on the provisions cited above, in particular those resulting from the amendments established to the Tax Regime of FIIAH, the Petitioner requested the Tax and Customs Authority the assessment of IMT and Stamp Duty, relating to the fraction that is the subject of the present request for arbitral ruling,

v. the Petitioner further signals the nature of taxes of single obligation both of IMT and IS, and that the taxable event, located in time, is exhausted in the act of acquisition of the real property, and that the fact that it was granted the exemption from the said taxes at the time of the said acquisition constitutes an acquired right crystallized in its legal sphere on the date when the amendments to the Special Regime of FIIAH occurred,

vi. the Petitioner further adds that in accordance with the regime in force at the date of acquisition, the said exemptions were not subject to a resolutive condition being manifest that,

vii- there not being, however, legally provided, at the moment of recognition of exemption, any facts or circumstances on which the lapse of the recognized exemption depended, it is manifest that the subsequent imposition of such facts or circumstances on exemptions crystallized in the legal order – tax of the Petitioner suffers from unconstitutionality by violation of the principle of non-retroactivity of tax legislation, enshrined in article 103(3) of the Constitution of the Portuguese Republic",

viii. concluding the Petitioner that "Article 236 (Transitional provision in the context of the special regime applicable to FIIAH and SIIAH) of Law no. 83-C/2013, of 31 December (State Budget for 2014), by extending the application of the current Tax Regime of FIIAH "to real properties that have been acquired by FIIAH before 1 January 2014, with the three-year period provided for in paragraph 14 being calculated, in such cases, from 1 January 2014" - is directly and unequivocally violating the principle of non-retroactivity of tax legislation constitutionally enshrined. In effect, the extension enshrined therein constitutes a new regime of lapse of the exemptions provided for in paragraphs 7(a) and 8 of article 8 (Tax Regime) and not a mere clarification of a criterion previously provided"

ix- in support of the position it subscribes to, the Petitioner attached to the file a legal opinion, having as its object the unconstitutionality of article 236(2) of Law no. 83-C/2013, of 31 December.

  1. Fundamentally and conclusively, the Petitioner asks the Tribunal to assess "whether paragraph 2 of article 236 (Transitional Provision in the context of the Special Regime Applicable to FIIAH and SIIAH) of Law no. 83-C/2013, of 31 December – insofar as it determines the application of the current Tax Regime of FIIAH "to real properties that have been acquired by FIIAH before 1 January 2014, with the three-year period provided for in paragraph 14 being calculated, in such cases, from 1 January 2014" – constitutes a new regime of lapse of the exemptions provided for in paragraph 7(a) and paragraph 8 of article 8 (Tax Regime) of the Tax Regime of FIIAH, revealing a flagrant and unequivocal violation of the principle of non-retroactivity of tax legislation, embodied in article 103(3) of the Constitution of the Portuguese Republic"

  2. The AT, duly notified to do so, submitted its response in a timely manner, proclaiming the objectives that led to the creation of a special temporary regime applicable to real estate investment funds for residential rental (FIIAH), and to real estate investment companies for residential rental (SIIAH) tracing its legal framework from Law no. 64-A/2008, of 31 December (2009 State Budget) to the amendments introduced by the State Budget Law for 2014 (Law no. 83-C/2013, of 31 December).

13.1. It further alleges the following, regarding the dismissal of the request for arbitral ruling (mentioned mainly by transcription),

13.2. (…) it must be noted that, at the time of creation of the tax regime applicable to FIIAH, with Law no. 64-A/2008, of 31 December, the exemptions in question, both in IMT and Stamp Duty, required, respectively:

(i) that the acquisition of the real properties was intended exclusively for "rental for permanent residence" and,

(ii) that the transmission had as its object "urban real properties intended for permanent residence that occurs as a result of the conversion of the right of ownership of such real properties into a right of rental over the same, as well as with the exercise of the purchase option provided for in paragraph 3 of article 5". (see article 49 of the response),

13.3.(…) the taxpayers who wished to benefit from the said exemptions, have always, since the beginning of the tax regime applicable to FIIAH, had to fulfill the requirement that such real properties were intended exclusively for rental for permanent residence, (see article 50 of the response),

13.4. Wherefore the Petitioner is wrong when it affirms that the exemptions in question were not conditioned by any facts or circumstances, and, consequently, the argument it constructs starting from such wrong assumption is likewise affected by error, (see article 51 of the response),

13.5. (…) the new wording introduced by Law no. 83-C/2013, of 31 December, in favour of legal certainty and the principle of protection of legitimate expectations, and in keeping with the spirit of the legislator, when creating the regime, came only to clarify the criterion already required (see article 52 of the response),

13.6. Stipulating "that urban real properties are intended for rental for permanent residence whenever they are the subject of a rental contract for permanent residence within three years from the moment they came to form part of the fund's assets" (see article 53 of the response),

13.7. It is to be concluded, thus, that, with the amendments introduced, the ratio of the exemptions established was not altered, and it should be underscored that there was no determination of immediate extinction of the benefit in the event that the said rental contract was not concluded, as a quite extended period of three years was granted for that purpose (see article 54 of the response),

13.8. The Respondent further adds that it must be noted that the cessation of a tax benefit may always take place, for example, if it is established, in a concrete case, by means of inspection, that the respective requirements are not met, (see article 61 of the response),

13.9. (…) pursuant to article 7(1) of the Tax Benefits Statute: "All persons, individual or collective, of public or private law, to whom tax benefits are granted, automatic or dependent on recognition, are subject to inspection by the Tax and Customs Authority, the Regional Department of Tax Affairs and other competent entities, to control the verification of the requirements of the respective tax benefits and the compliance with the obligations imposed on the holders of the right to the benefits" (see article 62 of the response).

  1. The parties have legal personality and legal capacity, are legitimate and are duly and legally represented (articles 3, 6 and 15 of the CPPT, by virtue of article 29(1)(a) of the RJAT),

  2. The proceedings do not suffer from nullities and no exception has been raised.

  3. The cumulation of requests is legal, as the requirements provided for in article 3(1) of the RJAT are fulfilled, that is, the merit of the requests depends, fundamentally, on the assessment of the same factual circumstances and on the interpretation and application of the same principles or rules of law,

II- LEGAL GROUNDS

A.1. Facts Established as Proven

a. the Petitioner is a Closed Real Estate Investment Fund for Residential Rental, denominated "B… – Closed Real Estate Investment Fund For Residential Rental" managed and represented by the company A…, S.A.,

b- the fund was at the date of the assessments now in question the owner of the urban real property corresponding to the registry article … (fraction "E" of the Union of Parishes of …, ... … and …), in the municipality of Oeiras,

c- the said real property was acquired on 18 December 2013, its acquisition having benefited from exemption from IMT and Stamp Duty, under paragraphs 7(a) and 8 of article 8 of the Legal Regime of FIIAH, approved by Law no. 64-A/2008, of 31 December (2009 State Budget),

d- in view of the disposal of the real property in question, the assessment of IMT and Stamp Duty relating to the said fraction was requested on 20-10-2016, pursuant to the provisions of paragraph 16 of article 8 of the special regime applicable to FIIAH, approved by Law no. 64-A/2008, of 31 December, a provision added by Law no. 83-C/2013, of 31 December (2014 State Budget),

e- on 20-10-2016, the following assessments were effected:

  • IMT, assessment no. …, in the amount of €10,281.88

  • Stamp Duty, assessment no…, in the amount of €2,108.00

f- the taxes resulting from the identified assessments were paid on 21-10-2016,

g- on 16-01-2017, the Petitioner through its representative submitted a request for arbitral ruling that gave rise to the present proceedings.

A.2. Facts Established as Not Proven

With relevance to the decision, there are no facts that should be considered as not proven.

A.3. Grounds for the Matter Established as Proven and Not Proven

With regard to the factual matter, the tribunal does not have to pronounce upon everything that was alleged by the parties, it being instead incumbent upon it the duty to select the facts that matter for the decision, to discriminate the matter proven from the not proven [(see article 123(2) of the Code of Tax Procedure and Process and article 607(3) of the Code of Civil Process, applicable by virtue of article 29(1)(a) and (e) of the RJAT)].

Thus, the facts pertinent to the judgment of the case are chosen and selected based on their legal relevance, which is established with regard to the various plausible solutions of the question(s) of law, (see article 596 of the CPC applicable by virtue of article 29(1)(e) of the RJAT).

Accordingly, having regard to the positions assumed by the parties, and the documents attached to the file, the facts enumerated above are considered proven with relevance to the decision.

B. ON THE LAW

The central question that is the subject of the present proceedings to which an answer falls to be given, in light of the position and arguments presented by the parties, is reduced to determining whether the acts of assessment of IMT and IS underlying are or are not illegal by violation of the provisions of article 103(3) of the Constitution of the Portuguese Republic.

In other words, the question placed before the Arbitral Tribunal is limited to the Petitioner's claim regarding the assessment of the illegality of the IMT and IS assessments, above identified, effected based on a request for assessment formulated under paragraph 16 of article 8 of the Special Regime of FIIAH and paragraph 2 of article 236 of Law no. 83-C/2013, of 31 December, being this provision that is at the center of the disagreement between the parties.

It should be noted that the assessment notes in question were based, as appears from the same, on paragraph 16 of article 8 of the Regime of Real Estate Investment Funds for Residential Rental (FIIAH), that is, disposal of the real property/fraction that had been acquired with the tax benefits now in question.

Before we address the question to be decided that the present proceedings invoke, already submitted on various occasions to the assessment of several Tax Arbitral Tribunals, it shall be necessary to examine the normative framework that underlies it.

Law no. 64-A/2008, of 31 December (2009 State Budget) in its articles 102 to 104 approved a special regime applicable to real estate investment funds for residential rental (FIIAH) and real estate investment companies for residential rental (SIIAH), applicable to "the five years following the entry into force of the present law and to real properties acquired by them in the same period" in accordance with the provisions of article 104.

In accordance with the Report of the Draft Law no. 226/X (State Budget for 2009) the objectives of this special regime are clear: "Creation of Real Estate Investment Funds in Residential Rental.

Also worthy of mention is the initiative in the matter of creation of funds and companies for real estate investment specifically dedicated to investment in real properties intended for urban rental in Portugal, providing for a tax regime especially favorable applicable until 31 December 2020. The present regime shall apply to funds and companies established in the five years.

Law no. 64-A/2008, of 31 December, approved, as mentioned, in articles 102 and following a special regime applicable to real estate investment funds for residential rental (FIIAH) and real estate investment companies for residential rental (SIIAH) establishing in its article 8 a special tax regime, providing for, among others, exemptions in IMT and IS.

Article 8

Tax Regime

(…)

"7. The following are exempted from IMT:

a) Acquisitions of urban real estate or autonomous fractions of urban real estate intended exclusively for rental for permanent residence, by the investment funds referred to in paragraph 1:

b) Acquisitions of urban real estate or autonomous fractions of urban real estate intended for permanent personal residence, as a result of the exercise of the purchase option referred to in paragraph 3 of article 5 by the tenants of the real properties that form part of the assets of the investment funds referred to in paragraph 1

(…)

"8. The following are exempted from stamp duty all acts practiced, provided they are connected with the transmission of urban real properties intended for permanent residence that occurs as a result of the conversion of the right of ownership of such real properties into a right of rental over the same, as well as with the exercise of the purchase option provided for in paragraph 3 of article 5".

Law no. 83-C/2013, of 31 December, in addition to amending the tax regime of the funds and companies for real estate investment for residential rental through its article 235, added new paragraphs 14 to 16 to article 8 of the regime of FIIAH in the following sense:

(…)

"14. For the purposes of the provisions of paragraphs 6 to 8, it is considered that urban real properties are intended for rental for permanent residence whenever they are the subject of a rental contract for permanent residence within three years from the moment they came to form part of the fund's assets, with the taxpayer required to communicate and provide proof, within 30 days following the end of the said period".

"15. When the real properties have not been the subject of a rental contract within the three-year period provided for in the preceding paragraph, the exemptions provided for in paragraphs 6 to 8 shall cease to have effect, in which case the taxpayer shall request the AT, within thirty days following the end of the said period, the assessment of the respective tax"

"16. If the real properties are disposed of, with the exception of the cases provided for in article 5, or if the FIIAH is subject to liquidation, before the period provided for in paragraph 14 has elapsed, the taxpayer shall likewise request the AT, prior to the disposal of the real property or the liquidation of the FIIAH, the assessment of the tax due pursuant to the preceding paragraph."

On the other hand, article 236 of the State Budget Law for 2014 (Law no. 83-C/2013 of 31 December) also established the following transitional provision in the context of the special regime applicable to FIIAH and SIIAH:

Article 236

Transitional Provision in the Context of the Special Regime Applicable to FIIAH and SIIAH

"1. The provisions of paragraphs 14 to 16 of article 8 of the special regime applicable to FIIAH and SIIAH, approved by articles 102 to 104 of Law no. 64-A/2008, of 31 December, shall apply to real properties acquired by FIIAH from January 2014"

"2. Notwithstanding the provisions of the preceding paragraph, the provisions of paragraphs 14 to 16 of article 8 of the special regime applicable to FIIAH and SIIAH, approved by articles 102 to 104 of Law no. 64-A/2008, of 31 December shall equally apply to real properties acquired by FIIAH before 1 January 2014, with the three-year period provided for in paragraph 14 being calculated, in such cases, from 1 January 2014"

Given the tax regime of real estate investment funds and companies for residential rental, with the provision of article 8 already mentioned special regime applicable to FIIAH and SIIAH, there will also, in our opinion, and as raised by the Respondent, be a need to take into account the provisions contained in the Tax Benefits Statute.

In this way, article 2 of such normative provides:

Article 2

Concept of Tax Benefit and Fiscal Expenditure and Respective Control

"1. Tax benefits are considered to be exceptional measures instituted for the protection of relevant extrafiscal public interests that are superior to those of the taxation they prevent."

"2. Tax benefits are exemptions, reductions in rates, deductions from the tax base and from the tax levy, accelerated depreciations and reintegrations and other tax measures that comply with the characteristics set forth in the preceding paragraph".

It is further provided in paragraphs 7 and 14 of the Tax Benefits Statute:

Article 7

Inspection

"All persons, individual or collective, of public or private law, to whom tax benefits are granted, automatic or dependent on recognition, are subject to inspection by the General Directorate of Taxes and other competent entities, for control of the verification of the requirements of the respective tax benefits and of compliance with the obligations imposed on the holders of the right to the benefits"

Article 14

Extinction of Tax Benefits

"1. The extinction of tax benefits results in the automatic restoration of the taxation – rule."

(…)

"3. When the tax benefit relates to the acquisition of goods intended for the direct realization of the purposes of the acquirers, it ceases to have effect if those were disposed of or given another purpose without authorization of the Ministry of Finance, without prejudice to other sanctions or different regimes established by law".

Having reviewed the essential normative framework for the decision of the underlying question, and with a view to its application to the case sub judice, we subscribe, with the necessary adaptations, to the conclusions and grounds that are drawn (among various others) from the arbitral decisions issued in the context of proceedings 689/2015- T of 02/05/2016 and 683/2016- T of 20/05/2016, as we agree with the same, and they replicate (in addition to numerous others) the sense of various decisions issued in the context of CAAD, in situations similar to those of the present case.

"(….) the obligation to allocate the real property to residential rental is not a requirement of the amendments introduced by articles 235 and 236 of Law 83-C/2013, of 31 December, but a requirement of the tax regime of FIIAH. It is the natural consequence, as the Respondent well alleges, of the motivations that led to the creation of a special temporary regime applicable to these Funds, linked to the economic crisis and the consequent increased difficulty of individuals and families in paying the installments of loan contracts celebrated for acquisition of permanent personal residence, the regime therefore intending to address situations of difficulty and encourage rental for permanent personal residence.

The 2014 State Budget does, certainly, establish new rules for the exemption: if the allocation to rental for permanent personal residence does not occur within the period of 3 years after the entry of the real property into the Fund and, also if the FIIAH is subject to liquidation before that period has elapsed, the acquirer must request the assessment of the IMT that was not assessed".

In the case at hand, and as results from the proven facts, the Petitioner Fund acquired the fraction in question on 18 December 2013, having requested the assessment of IMT and IS on 20 October 2016, as extracted from the respective assessment notes "because the above-mentioned fraction is going to be disposed of".

(…)

"The fact that the disposal of the real property causes the exemption to lapse is not, as shall be explained hereafter, a new fact resulting from the addition made by the 2014 State Budget. New will be, at most, the obligation of the acquirer to request the assessment of the taxes that were not assessed prior to the disposal. A provision that not only is merely procedural, but is not even in question in the present proceedings, taking into account that it was precisely that which the Petitioner did and the consequence would always be, as we shall see, that results from the Tax Benefits Statute, that the taxes would be assessed officially by the Tax Authority (increased by interest and sanctions provided for in law), once the disposal was ascertained.

It seems to us, therefore, evident that the question sub judice is not related to the possible unconstitutionality, by violation of the prohibition on retroactivity of tax law, of the paragraphs added to article 8 by the 2014 State Budget.

In fact, the disposal of the real property in question by the Petitioner determines, as it itself recognized in the declarations for assessment of IMT and IS, the lapse of the exemption, because it was given a different purpose than the one that had determined the granting of the benefit.

For compliance with article 8(7)(a), it is not sufficient to have a declared intention at the acquisition of the real property, but an actual allocation to rental for permanent residence.

It is not, therefore, true, that, as the Petitioner affirms, there were not already legally provided, at the moment of recognition of the exemption, the facts or circumstances on which the lapse of the exemption depended, at least as regards the circumstances that actually occurred: the disposal of the real property.

In truth, the granting of a benefit was already – and is always – dependent on the effective verification of its respective requirements, pursuant to article 12 of the Tax Benefits Statute (article 11, in the version of the Tax Benefits Statute that was in effect prior to the republication thereof by Decree-Law no. 108/2008, of 26/06).

The fact that the Petitioner proceeded to dispose of the real property which, upon acquiring, it declared it would allocate for the purpose that allowed it to be recognized – as it was – the exemption from IMT and IS, would always determine, even if the added paragraph 16 did not expressly provide for it, the lapse of such exemptions, by effect of the provisions of article 12 and paragraph 3 of article 14 of the Tax Benefits Statute (former article 12(3) in the version of the Tax Benefits Statute that was in effect prior to the republication thereof by Decree-Law no. 108/2008, of 26/06), according to which "When a tax benefit relates to the acquisition of goods intended for the direct realization of the purposes of the acquirers, it ceases to have effect if those are disposed of or given another purpose without authorization of the Minister of Finance, without prejudice to other sanctions or different regimes established by law".

(…)

"does not arise in the case at hand the question of the alleged unconstitutionality of the provisions added insofar as, in the part corresponding to the disposal of the real property, paragraph 16 of article 8 of the Legal Regime of FIIAH is limited to reiterating what already resulted from the provisions of the Tax Benefits Statute.

Which moreover is well understood, given the ratio of the granting of tax benefits.

The ratio for the attribution of the tax benefit in the context of IMT and IS to FIIAH is, clearly, their allocation to rental for permanent residence – "Acquisitions of urban real estate or autonomous fractions of urban real estate intended exclusively for rental for permanent residence, by the investment funds…" – whereby the consequence of giving it a different purpose is that the exemption could not have been granted, and there is a need to restore legality, assessing the taxes that, were it not for the declaration of intent made at the time of acquisition, would have had to be assessed.

Which the Petitioner recognized, all the more so as it is that which appears in the declarations made by the Petitioner itself for assessment of IMT and IS.

In conclusion, the disposal of the real property would always determine the lapse of the exemption by application of the provisions of paragraph 3 of article 14 of the Tax Benefits Statute, there not being, therefore, in the situation sub judice, any application of retroactive law that introduces a new regime for the lapse of the exemptions nor does there exist injury to the expectations of the Petitioner or aggravation of its tax position, wherefore we conclude that the IMT and Stamp Duty assessments in question are legal".

Adhering, without any reservations, to the conclusions and grounds of the arbitral decisions we have just partially transcribed, doubts seem not to subsist as to the legality of the disputed assessments, determining, consequently, the dismissal of the Petitioner's requests.

Being precluded the knowledge of the question inherent to the raised retroactivity of the transitional regime provided for by article 236 of the 2014 State Budget, as, in consonance with what has just been said, the circumstances that gave rise to the assessments here in question, do not have any relation with the addition of paragraphs 14, 15 and 16 to article 8 of the special regime applicable to FIIAH and SIIAH, produced by article 235 of the said budget law, but solely and only with the disposal of the fraction for a purpose other than the one that gave rise to the exemptions then granted.

For identical reasons, knowledge is equally precluded of the question related to the alleged nullity or (alternatively, should this not be understood), annulability of the assessments in question in the present proceedings.

III- REIMBURSEMENT OF AMOUNTS PAID AND INDEMNITY INTEREST

The Petitioner formulates the request for restitution of the amounts paid, plus indemnity interest accrued until full payment.

The reimbursement of the amounts and the right to indemnity interest depend on the merit of the request for declaration of illegality of the assessment acts.

Consequently, given that this request is dismissed, necessarily the requests for reimbursement and indemnity interest are also dismissed.

IV- DECISION

In accordance with the foregoing, this Singular Arbitral Tribunal decides:

  • to dismiss the requests formulated by the Petitioner,
  • to condemn the Petitioner to payment of the costs of proceedings.

V- VALUE OF THE CASE

In accordance with the provisions of articles 296(1) and 296(2) of the Code of Civil Process, approved by Law no. 41/2013, of 26 June, 97-A(1)(a) of the Code of Tax Procedure and Process, and article 3(2) of the Regulation of Costs in Tax Arbitration Proceedings, the value of the case is set at €12,389.88.

VI- COSTS

Pursuant to the provisions of articles 12(2) and 22(4) of the RJAT, and articles 2 and 4 of the Regulation of Costs in Tax Arbitration Proceedings, and Table I attached hereto, the amount of costs is set at €918.00, to be borne by the Petitioner.

NOTIFY

Text prepared on computer, pursuant to the provisions of article 131 of the Code of Civil Process, applicable by referral of article 29(1)(e) of the Legal Regime of Tax Arbitration, with blank verses, and reviewed by the arbitrator.

The drafting of the present decision is governed by the spelling prior to the Orthographic Agreement of 1990, except as regards the transcriptions effected.

Twenty-first of July of two thousand and seventeen

The Arbitrator

(José Coutinho Pires)

Frequently Asked Questions

Automatically Created

What IMT and Stamp Tax exemptions apply to FIIAH housing rental investment funds under Article 236 of Law 83-C/2013?
Under Article 236 of Law 83-C/2013, FIIAH funds receive IMT and Stamp Tax exemptions on urban property acquisitions intended for permanent residence rental, provided the properties are actually rented within three years. For properties acquired before January 1, 2014, the three-year period is calculated from that date. If properties remain unrented after three years, the exemptions cease and the fund must request tax assessment within 30 days. The regime also requires communication and proof of rental to the Tax Authority within 30 days following the three-year period's end.
Can a FIIAH fund request annulment of IMT and Stamp Tax assessments on property acquisitions for housing rental?
Yes, a FIIAH fund can request annulment of IMT and Stamp Tax assessments through CAAD arbitration under Decree-Law 10/2011. The fund must argue legal grounds such as unconstitutionality of retroactive application, violation of acquired rights, or improper application of exemption rules. In this case, the fund challenged assessments totaling €12,389.88, claiming Article 236's retroactive imposition of rental conditions on pre-2014 acquisitions violated constitutional non-retroactivity principles enshrined in Article 103(3) of the Portuguese Constitution, seeking declaration of nullity or annulment with compensatory interest refund.
What is the CAAD arbitration procedure for challenging IMT and Imposto do Selo tax assessments in Portugal?
The CAAD arbitration procedure for challenging IMT and Imposto do Selo assessments follows RJAT (Decree-Law 10/2011). The taxpayer files a request for establishment of a singular arbitral tribunal under Article 2(1)(a) and Articles 10(1)-(2). The CAAD President accepts and notifies the Tax Authority, then designates an arbitrator per Article 6(2)(a). Parties may refuse the arbitrator under Articles 6-7 of the Deontological Code. The tribunal is established within statutory periods (Article 11(1)(c)). The Tax Authority submits a response, followed by written arguments from both parties. The arbitrator may exempt the oral hearing under Article 18, setting deadlines for the decision.
Are real estate investment funds for housing rental (FIIAH) entitled to refunds of IMT and Stamp Tax with compensatory interest?
Yes, FIIAH funds are entitled to refunds of IMT and Stamp Tax with compensatory interest if assessments are annulled or declared null. In arbitration requests under RJAT, petitioners explicitly request reimbursement of paid tax amounts plus indemnity interest (juros indemnizatórios). The entitlement depends on successful challenge of the assessment on grounds such as unconstitutionality, violation of acquired rights, or improper denial of exemptions. Compensatory interest compensates taxpayers for the temporal loss of use of wrongfully collected funds, calculated from payment date to refund date according to applicable legal rates.
How does the special tax regime (SIIAH) under Law 83-C/2013 affect property transfer taxes for closed-end investment funds?
The special tax regime under Law 83-C/2013 substantially affects property transfer taxes for closed-end FIIAH funds by conditioning exemptions on actual rental activity. Articles 102-104 of Law 64-A/2008, as amended, grant IMT and Stamp Tax exemptions for acquisitions intended for permanent residence rental, but paragraphs 14-16 added by Law 83-C/2013 require properties to be rented within three years to maintain exemptions. If unrented, funds must request tax assessment within 30 days after the period ends. Article 236 applies these conditions retroactively to pre-2014 acquisitions, raising constitutional concerns about retroactive taxation and acquired rights protection for closed-end investment structures.