IMI Exemption for UNESCO World Heritage Properties: CAAD Arbitral Decision 470/2018-T on Official Review and EBF Article 44

ARBITRAL DECISION

I – REPORT

1. On 24.09.2018, the Claimant, A..., S.A., legal entity no. ..., with tax domicile at ..., nos. ..., ..., Évora, petitioned CAAD for the constitution of an arbitral tribunal, pursuant to Article 10 of Decree-Law no. 10/2011, of 20 January (Legal Regime of Arbitration in Tax Matters, hereinafter referred to only as LRAT), in which the Tax and Customs Authority is Respondent, with a view to the annulment of the order issued on 20 June 2018 by the Director of Finance of ..., refusing the Request for Official Review, relating to IMI, for the year 2015 and, as well, the act of assessment of this tax issued on 26.02.2016, relating to the aforementioned year of 2015, in the amount of €35,845.33 (thirty-five thousand, eight hundred and forty-five euros and thirty-three cents), to which correspond the documents nos. 2015..., 2015... and 2015..., relating to the first, second and third instalments, of the tax in question.

The Claimant further petitions for reimbursement of the amount of tax alleged to have been paid, plus the respective compensatory interest, calculated at the legal rate in force.

1. The request for constitution of the arbitral tribunal was accepted by the President of CAAD and notified to the Tax and Customs Authority.

Pursuant to Article 6, paragraph 1, of the LRAT, by decision of the President of the Deontological Council, duly communicated to the parties within the legally applicable periods, the signatory was appointed arbitrator, who communicated acceptance of the assignment to the Deontological Council and to the Centre for Administrative Arbitration within the regularly applicable period.

The Arbitral Tribunal was constituted on 5 December 2018.

1. The grounds presented by the Claimant in support of its annulment claim were, in summary, the following:

a) The properties owned by the Claimant, on which the assessment at issue in the present proceedings was based, are situated in the area designated as the Historic Centre of Évora, being consequently integrated in the classification as a Cultural Heritage of Humanity by UNESCO, as confirmed by certificates issued by the Services of the Municipal Chamber of Évora.

b) The act of assessment of IMI placed in question in the present Request for Arbitral Pronouncement is based on an incorrect understanding of the facts and presupposes an incorrect application of law, which can only be attributed to the Respondent, which determines the necessity of its annulment.

c) Contrary to the position taken by the Respondent, the Claimant considers that the properties subject to the assessment of IMI under contestation are exempt from tax, pursuant to paragraph n) of paragraph 1 of Article 44 of the EBF (hereinafter EBF).

d) Indeed, under this rule, exempt from IMI are "properties classified as national monuments and properties individually classified as of public interest or of municipal interest, pursuant to the applicable legislation."

e) Paragraphs 2, 3 and 4 of Article 15 of the Law on Bases of Cultural Heritage (rectius Law no. 107/2001, of 8 September) establish that "2 – Immovable property may be classified as of national interest, of public interest or of municipal interest (...) 3 – For immovable property classified as of national interest, whether they be monuments, ensembles or sites, the designation national monument shall be adopted (…) 4 – A property is considered to be of national interest when its protection and enhancement, in whole or in part, represents a cultural value of significance to the Nation".

f) The Claimant considers that it follows from the articulation of the aforementioned provisions, and from the entry into force of the Law on Bases of Cultural Heritage in 2001, that the inclusion of immovable property in the list of world heritage has as an immediate consequence their classification as immovable property of national interest and, therefore, as "national monuments", without need, therefore, for any other act of classification.

g) In view of the foregoing, the properties of the Claimant situated in that area designated as the Historic Centre of Évora are considered UNESCO World Heritage, and are therefore, from the publication of the aforementioned Notice, classified as "national monuments", under Article 15 of the Law on Bases of Cultural Heritage and, as such, exempt from IMI, pursuant to paragraph n) of paragraph 1 of Article 44 of the EBF.

h) In this sense, see the Judgment of the Northern Central Administrative Court, of 1 June 2017, issued in the course of proceedings no. 00693/14.1BEPRT and the Judgment of the Southern Central Administrative Court, dated 8 June 2017, issued in the course of proceedings no. 09284/16 and, as well, the arbitral decisions issued by CAAD, namely, in the course of proceedings no. 98/2016-T, of 14 June 2016, of proceedings no. 379/2016, of 7 December 2016 and, in particular, the arbitral decision issued in proceedings no. 405/2017-T, of 21 December 2017.

i) In view of the foregoing, there shall be determined the annulment of the Order issued on 20 June 2018 by the Director of Finance of ..., refusing the Request for Official Review, relating to IMI, for the year 2015 and the act of assessment of IMI, for the year 2015, which established a total amount payable of € 35,845.33.

1. The ATA – Tax and Customs Authority, called upon to pronounce itself, contested the Claimant's claim, defending itself by objection, in summary, with the following grounds:

BY EXCEPTION,

a) The arbitral tribunal is incompetent to review the refusal of the request for official review of the tax act, inasmuch as such matter goes beyond the competencies reserved to it by law.

b) The request for arbitral pronouncement has as its object, albeit in a mediate manner, the assessment of IMI, which in turn was the subject of a request for official review, and from Article 2, subsection a) of Ordinance 112-A/2011, of 22 March, there follows the exclusion of such mechanism from the scope of the Respondent's binding to arbitral jurisdiction since it is not mentioned therein, only being the gracious claim through the remission to Articles 131 to 133 of the Code of Tax Procedure and Process.

c) Thus, due to the lack of binding of the Respondent, mandatory pursuant to Article 4, no. 1, of the LRAT, there occurs the material incompetence of the arbitral tribunal for the review of the assessment of IMI inherent to the request for official review of the Tax Act which constitutes a dilatory exception that impedes the continuation of the proceedings, leading to absolution of the claim as to the claim in question, in accordance with the provision of Article 576/1 and 2 and Article 577-a) of the CPC pursuant to Article 29/1-e) of the LRAT.

Without dispensing,

BY OBJECTION

d) The Law on Bases of Cultural Heritage (hereinafter LBCH) establishes in Article 15 three distinct legal-patrimonial concepts relating to immovable cultural property: the category (Monument, Ensemble and Site), the classification (National Interest, Public Interest and Municipal Interest) and the designation (National Monument, reserved exclusively for monuments, ensembles or sites that are classified as being of National Interest).

e) There has not existed (since the entry into force of the LBCH) a classification called National Monument, but only the designation of National Monument, which is not the same thing, and it is not possible to affirm that the Historic Centre of Évora is classified as a National Monument but only, at most, designated as a National Monument as a result of law (Art. 15/2 and 3, by remission of Article 15/7, both of the LBCH, articulated with Article 72/1 of Decree-Law 309/2009).

f) Thus, not being the Historic Centre of Évora classified as a National Monument, but only designated as such, the exemption provided for in paragraph n) of no. 1, of Art. 44 of the Tax Benefits Statute is not applicable here, the first segment of the rule ("Properties classified as national monuments") referring to properties classified as National Monuments in light of the laws of the Estado Novo that preceded the LBCH.

g) Even if one were to consider that the inscription of the Historic Centre of Évora on the "UNESCO World Heritage List" constitutes a classification and that this corresponds to the graduation of National Monument, it constitutes an abusive interpretation the conclusion that the properties here in question, merely by being inserted in that ensemble, are equally classified as National Monument.

h) Not having the Claimant demonstrated that its properties are individually classified as National Monument, it is necessary to conclude that it does not meet the requirements to benefit from the tax benefit contained in Article 44/1-N) of the EBF.

i) In truth, an ensemble, as a plurality of properties as it is, is not a property in a fiscal sense, and only these may benefit from the exemption provided for in Article 44, no. 1, subsection n), of the EBF.

j) The interpretation of Art. 44, no. 1, subsection n) of the EBF, in articulation with Article 15, nos. 3 and 7, of the LBCH and with Article 3, no. 3 of Decree-Law 309/2009, according to which every single property, merely and solely by being located within the perimeter of a classified ensemble is itself also individually classified and apt to benefit from the exemption from IMI, is unconstitutional, by violation of the constitutional principles of tax equality, fiscal justice, contributory capacity and proportionality.

k) It is also unconstitutional by violation of local autonomy, inasmuch as the Municipality of Évora had no say in the matter of the loss of IMI revenue underlying the area of the Historic Centre of Évora and also by violation of the principle of participation in the decision, inasmuch as through Article 15, no. 7, of the LBCH the constitutional principle of participation (Article 268, no. 3 of the CRP) was disrespected in the formation of the decision of classification.

l) Suffering from organic unconstitutionality the interpretation of the Claimant by equating "the classifications provided for in the legislation of the Estado Novo and those provided for in the LBCH, that is, by the equivalence between the classification National Monument (provided for in Decree 20.3985 of 1932) and the classification National Interest (provided for in Article 15/2 of the LBCH) inasmuch as the classification is one of the systems of patrimonial protection adopted by the LBCH, and the definition of its bases constitutes a matter constitutionally reserved to the Assembly of the Republic, except by authorization of the latter to the Government, whereby the question of the equivalence or equating of different graduations of classification must necessarily result from the law of Parliament or from an authorized decree-law of the Government [Article 165/1, g) of the CRP], and never from a deductive judgment determined by the mere similarity between terminologies employed by legislators throughout the successive legal regimes of protection of Portuguese cultural heritage.

1. The Claimant replied, in writing, to the exception raised by the Respondent, in summary, as follows:

a) Subsection a) of Article 2 of Ordinance no. 112-A/2011, of 22 March concerns only acts of self-assessment – and not acts of assessment, as is the case with an assessment of IMI.

b) Even if this were not the case, it would still be said that, as is well known, the Supreme Administrative Court has, repeatedly, defended the equivalence between the request for official review of the tax act and the necessary gracious claim.

c) This equivalence is not forbidden in arbitral proceedings, as understood by Carla Castelo Trindade – which the Claimant agrees with – who states that "To exclude arbitral jurisdiction merely because the means employed was not effectively a gracious claim would be to violate the principle of effective jurisdictional protection, as enshrined in Article 20 of the CRP." – see TRINDADE, Carla Castelo, "Legal Regime of Tax Arbitration Annotated", Almedina, 2016.

d) Legal doctrine and jurisprudence have understood – and on this point we again follow the words of Carla Castelo Trindade that "(…) acts of second or third degrees may always be arbitrable, inasmuch as they themselves carry, and only to this extent, the (i)legality of the assessment acts in question."

e) In view of the foregoing, the dilatory exception of material incompetence of the Arbitral Tribunal for the review of the assessment of IMI that is the subject of the Request for Official Review, invoked by the Respondent in its Reply, shall be groundless, inasmuch as the competence of the Arbitral Tribunal constituted to know of the claim formulated by the Claimant in the present proceedings has been fully demonstrated.

1. Verifying the non-existence of any situation provided for in Art. 18, no. 1, of the LRAT, which would make the arbitral meeting therein provided necessary, the holding of the same was dispensed with, on the ground of the prohibition of the practice of useless acts.

2. The parties submitted written arguments.

3. It is necessary to resolve the following questions:

a) Incompetence of the arbitral tribunal.

b) Illegality of the decision that refused the request for official review and of the assessments that are the subject of the present proceedings.

c) Right of the Claimant to restitution of the tax paid.

d) Right of the Claimant to compensatory interest.

Given that the success of the exceptions, if verified, prevents the review of the merits of the case, the review thereof shall be conducted immediately after the fixing of the facts.

II – Relevant Facts

1. The following facts are considered proven:

2. The Claimant is registered in the property matrix as owner of the following urban properties, on which the act of assessment of IMI here in question was based:

i) Land for construction, identified with the registration article no. ..., of the Union of Parishes of ..., located at ..., no. ..., Évora, with the Tax Patrimonial Value of € 728,878.90;

ii) Autonomous fraction designated by the letter B of the property under the horizontal property regime, identified with the registration article no. ..., of the Union of Parishes of ..., located at ..., no. ..., with the Tax Patrimonial Value of € 947,612.16;

iii) Autonomous fraction designated by the letter D of the property under the horizontal property regime, identified with the registration article no. ..., of the Union of Parishes of ..., located at ..., no. ..., with the Tax Patrimonial Value of € 57,280.00;

iv) Autonomous fraction designated by the letter E of the property under the horizontal property regime, identified with the registration article no. ..., of the Union of Parishes of ..., located at ..., no. ..., Évora, with the Tax Patrimonial Value of € 77,840.00; and

v) Property in full ownership without floors or divisions capable of independent use, identified with the registration article no. ..., of the Union of Parishes of ..., located at Rua ..., nos. ... to ..., with the Tax Patrimonial Value of € 5,515,719.71.

1. On 26.02.2016 the Respondent proceeded to assess Municipal Tax on Immovable Property relating to these properties, for the year 2015, in the amount of €35,845.33 (thirty-five thousand, eight hundred and forty-five euros and thirty-three cents), with the issuance of documents nos. 2015..., 2015... and 2015..., relating to the first, second and third instalments.

2. The properties in question are situated in the historic centre of Évora, which is included in the UNESCO World Heritage list, a fact which was made public by Notice dated 20 January 1988, from the Directorate of Cultural Services, published in the Official Gazette, no. 39/1988, Series I, of 17 February 1988.

3. The Claimant submitted on 8.02.2018 a request for official review of the assessment act which is the subject of the present proceedings which was refused on 20.06.2018 by decision notified to the Claimant by registered mail with receipt acknowledgement sent on 22.06.2018 and the respective notice signed on 25.06.2018, a decision whose content contained in pages 63 to 66 of the administrative file contained in the case record is hereby reproduced in full for all legal purposes.

4. The Claimant proceeded to payment of the first, second and third instalments of the tax, respectively, on 27 April 2016, on 28 July 2016 and on 25 November 2016.

With relevance to the decision of the case, there are no unproven facts.

1. The Tribunal's conviction regarding the decision of the facts was based on the documents contained in the proceedings, as well as the positions of the parties expressed in the pleadings and in the decision of the request for official review.

Specifically for proof of the fact that the immovable properties in question are situated in the area delimited as the Historic Centre of Évora, the certificates issued by the Municipal Chamber of ... and also the express affirmations of the Respondent in the same sense, contained in the decision that refused the request for official review at pages 65 of the administrative file, and also at pages 53 and 59 were decisive.

III – SANATION

1. PRELIMINARY QUESTION: MATERIAL INCOMPETENCE

The Tax and Customs Authority raises the question of the incompetence of this Arbitral Tribunal and since the question of incompetence is of priority knowledge, the review thereof shall begin.

On this matter, Jorge Lopes de Sousa expounds:

"It does not result from the express tenor of the LRAT the possibility that acts refusing requests for review of a tax act may be reviewed by arbitral tribunals functioning in CAAD. In fact, Article 2 of the LRAT makes no express reference to these acts, contrary to what occurs with the legislative authorization on which the Government based itself to approve the LRAT, which refers to 'requests for review of tax acts' and 'administrative acts that involve the review of the legality of assessment acts'. However, the formula 'declaration of illegality of assessment acts of taxes, self-assessment, withholding at source and payment on account', used in subsection a) of no. 1 of Article 2 of the LRAT, in a mere declarative interpretation, does not restrict the scope of arbitral jurisdiction to cases in which an act of one of those types is directly impugned, since the illegality of assessment acts may be declared judicially as a corollary of the illegality of an act of a second degree, which confirms an assessment act, incorporating with that confirmation its illegality.

Indeed, it is unequivocal, from what has been said regarding decisions refusing gracious claims and hierarchical appeals, that included in the competencies of arbitral tribunals functioning in CAAD are cases in which the declaration of illegality of the acts indicated therein is effected through the declaration of illegality of an act of second or third degree, which are the object of the impugnatory claim. The possibility of review of the legality of primary acts through the review of the legality of acts of second or third degree is evident in the reference made in Article 2 of the LRAT to acts of self-assessment, withholding at source and payment on account, since, with respect to these acts, the necessary gracious claim is imposed, as a rule, in Articles 131 and 133 of the TCPP, whereby, in these cases, the direct object of the impugnatory proceedings is, as a rule, the act of second degree that reviews the legality of the assessment act, an act which, if it confirms it, must be annulled to obtain the declaration of illegality of the assessment act. It was indeed in this sense that the tax administration, through Ordinance no. 112-A/2011, of 22 March, interpreted these competencies of the arbitral tribunals functioning in CAAD, by removing from the scope of those competencies the 'claims relating to the declaration of illegality of acts of self-assessment, withholding at source and payment on account that have not been preceded by recourse to the administrative proceedings pursuant to Articles 131 to 133 of the Code of Tax Procedure and Process', which has the effect of restricting its binding to cases in which that recourse to the administrative proceedings was used.

Having obtained the conclusion that the formula used in subsection a) of no. 1 of Article 2 of the LRAT does not exclude cases in which the declaration of illegality results from the illegality of an act of second degree, it will also embrace cases in which the act of second degree is the refusal of requests for review of the tax act, since no reason is seen to restrict (…)" .

This understanding has been, for the most part, supported by arbitral jurisprudence.

This tribunal also considers the understanding expounded as correct, whereby it is decided that the exception of incompetence of the arbitral tribunal raised by the Respondent is groundless.

OTHER PROCEDURAL REQUIREMENTS

1. The tribunal is regularly constituted pursuant to the LRAT.

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

The proceedings do not suffer from vices that invalidate it.

IV – ON THE MERITS

1. Pursuant to subsection n), of paragraph 1, of Article 44 of the Tax Benefits Statute, exempt from IMI are "properties classified as national monuments and properties individually classified as of public interest or of municipal interest, pursuant to the applicable legislation."

The exemption currently contained in subsection n), of no. 1, of Article 44, of the Tax Benefits Statute was originally added by Article 45 of Law no. 109-B/2001 of 27 December, to the then Article 40 of that decree, with the following wording:

"Exemptions

1-Exempt from municipal levy:

(...)

n) Properties classified as national monuments or properties of public interest and as well as those classified as properties of municipal value or as cultural heritage, pursuant to the applicable legislation."

The tax rule referred to (and continues to refer to) the legal definitions contained in "applicable legislation" which is the Law on Bases of Cultural Heritage (Law no. 107/2001, of 8 September), specifically those contained in its Article 15. Pursuant to no. 2 of this article "Movable and immovable property may be classified as of national interest, of public interest or of municipal interest."

And pursuant to no. 3 "For immovable property classified as of national interest, whether they be monuments, ensembles or sites, the designation 'national monument' shall be adopted (…)".

Taking into account the remission made, there is no reasonable doubt that the concept of "national monument" adopted could not fail to be that contained in no. 3, of Article 15 of the LBCH, approved a few months before, which automatically grants immovable property classified as of national interest the designation of "National Monument".

Thus, in light of these rules, an immovable property designated as a "national monument" pursuant to Article 15, no. 3, of the LBCH, benefited from the exemption provided for in subsection n) of the then Article 40 of the EBF.

Furthermore, pursuant to no. 7 of the same article "Immovable cultural property included in the World Heritage list is integrated, for all purposes and in their respective category, in the list of property classified as of national interest."

Thus, in light of these rules, immovable cultural property included in this list were automatically classified as of national interest and considered "National Monument" benefiting thus from the legal exemption.

It should be noted that the aforementioned subsection n) refers to "properties" and not to "ensembles". In these cases, it is necessarily a multiplicity of properties.

This did not, however, prevent the application of the legal exemption to the properties forming part of these ensembles since, without terminological rigor, the legislator of the LBCH refers to ensembles as "Immovable Property" (nos. 1 and 3 of Article 15).

Not ignorant of the concepts used in Law no. 109-B/2001 of 27 December, and referring thereto, the legislator cannot fail to understand that the legislative intention was to exempt all properties forming part of the ensemble legally defined as "National Monument".

1. Law no. 53-A/2006, of 29 December, came to alter the wording of subsection n), of the then Article 40, of the Tax Benefits Statute, as follows:

"n) Properties classified as national monuments and properties individually classified as of public interest, of municipal value or cultural heritage, pursuant to the applicable legislation."

This wording is very close to that currently in force under n), of no. 1, of Article 44, of this decree, which is as follows:

"properties classified as national monuments and properties individually classified as of public interest or of municipal interest, pursuant to the applicable legislation."

In essence, and for what is relevant herein, the legislative change consisted, with respect to immovable property classified as of public interest and as well as those classified as immovable property of municipal interest, in the requirement of their individual classification as a condition to benefit from the exemption, differently from the legislative choice for properties classified as of National Interest (by inherence "National Monuments") with respect to which such requirement of individual classification was not established.

If doubts existed as to whether the exemption in subsection n) always required the individual classification of the properties, the new wording of the rule came to dispel them, by requiring it only for properties of public interest, of municipal value or as cultural heritage (now properties of public interest and of municipal interest).

In this sense was the decision issued in proceedings 325/2014-T, where the following considerations can be read, which are agreed with:

"1. Pursuant to Article 44 of the Tax Benefits Statute, no. 1: 'Exempt from municipal tax on immovable property: (...) n) Properties classified as national monuments and properties individually classified as of public interest or of municipal interest, pursuant to the applicable legislation'.

1. We can verify that this article is composed of two provisions. First, exempt from municipal tax on immovable property are properties classified as national monuments. Second, exempt from the same tax are properties individually classified as of public interest or of municipal interest.

(...)

1. The properties in question form part of the Historical Zone of ..., which was inscribed in the UNESCO World Heritage List, as declared by Notice no. 15173/2010, published in the Official Gazette, II Series of 30 July 2010, issued pursuant to no. 3 of Article 72 of Decree-Law 309/2009, of 23 October.

2. Article 15, no. 7, of Law 107/2001 expressly states that 'immovable cultural property included in the World Heritage list is integrated, for all purposes and in their respective categories, with property qualified as of national interest'.

(...)

1. Indeed, and as stated in Article 15 of Law 107/2001 and Article 3 of Decree-Law 309/2009, property classified as of national interest is designated as 'national monument', regardless of whether it is a single building, ensemble or site, and it is clear that the properties that make up the ensemble or site are covered by that classification.

(...), the provision of no. 5 of Article 44, as reworded by Law 3-B/2010, of 28 April, expressly provides that 'the exemption referred to in subsection n) of no. 1 is of an automatic character, operating through communication of the classification as national monuments or of individual classification as properties of public interest or of municipal interest (…)'. It results, therefore, in very clear terms that the intention of the legislator was to dispense with individual classification for the purposes of IMI exemption to national monuments, requiring it only in respect of properties of public interest or of municipal interest.

1. Now, with the properties in question integrated in the Historical Zone of ..., legally qualified as a national monument, it is manifest that they benefit from said exemption, thus being unlawful the assessments of IMI impugned (…)'"

Also in the same sense, it can be read in the recent judgment of the Supreme Administrative Court of 12 December 2018, issued in appeal 0501/17, the following:

"(...) the legislator, when drawing up the State Budget for 2007, wished to introduce a significant change in the regime of access to IMI exemptions that could benefit properties classified on account of their interest and cultural importance and/or patrimonial value.

Whereas in the version of the rule prior to this 2007 Budget the legislator did not require, for tax purposes, the individual classification of each of the properties, being satisfied, therefore, with their classification pursuant to the applicable legislation, with this change came to require one more requirement, that of individual classification pursuant to the applicable legislation.

However, the legislator only came to require this individual classification for immovable property that should be integrated in the categories of public interest, of municipal value or cultural heritage, not making the same requirement for immovable property that should be integrated in the category of national monument (in the EBF the legislator makes reference to national monument when intending to refer to immovable property of national interest because it is thus that pursuant to the provision of Article 15, no. 3 of Law no. 107/2001, of 08 September should be designated).

And this distinction results clearly from the express will of the legislator in editing the rule in question, that is, the legislator did not intend to require, for immovable property that should be included in the category of national monument (national interest) and for purposes of this tax exemption, that they should be subject to individual classification, maintaining, therefore, with respect to the same the regime that was previously established. Indeed the "new" wording of the provision maintains unchanged the first part of the article in question – Exempt from municipal tax on immovable property are properties classified as national monuments – which refers to national monuments.

This interpretation also results expressly from the parliamentary debate and voting that occurred with regard to this legal provision.

As can be read from the Official Journal of Parliament, Series I, no. 24, of 02.12.2006, pages 29 and 30, the requirement of individual classification of the immovable property that should be framed in the category of national monument was not expressly accepted by the representatives:

The President: — Members of Parliament, we will proceed to the vote on proposal 740-P, of the Greens, for the replacement of subsection n) of no. 1 of Article 40 of the Tax Benefits Statute contained in Article 77 of the bill.

Submitted to the vote, it was rejected, with votes against from the PS, PSD and CDS-PP and votes in favour from the PCP, BE and the Greens.

It was as follows: n) Properties classified on an individual basis as national monuments or properties of public interest and as well as those classified, also on an individual basis, as properties of municipal value or as cultural heritage, pursuant to the applicable legislation.

The President: — We will proceed to the vote on proposal 855-P, from the PS, an amendment to subsection n) of no. 1 of Article 40 of the Tax Benefits Statute proposed in Article 77.

Submitted to the vote, it was approved, with votes in favour from the PS, PSD and CDS-PP, votes against from the BE and abstentions from the PCP and the Greens.

It is as follows: n) Properties classified as national monuments and properties individually classified as of public interest, of municipal value or cultural heritage, pursuant to the applicable legislation.

The President: — With this approval the vote on subsection n) of no. 1 of Article 40 of the Tax Benefits Statute proposed in Article 77 is prejudiced [and which was as follows: n) Properties classified as national monuments, pursuant to the applicable legislation].

From this it is concluded, therefore, that the immovable property that had already previously benefited from the tax exemption, by being framed in the category designated by national monument, were not affected by the legislative changes made by the 2007 Budget, being able therefore to maintain the tax exemption of which they were benefiting(…)" .

It is reiterated, therefore, the conclusion that, in light of subsection n), of Article 44, of the EBF (as was already the case in the original wording of this subsection, of the then Article 40), the properties forming part of ensembles designated as "National Monument" benefit from the exemption therein provided, not requiring for this purpose individual classification.

1. Regarding the unconstitutionalities alleged by the Respondent, it must be recalled and emphasized that the exemption in question was inserted by Law no. 109-B/2001, of 27.12, in the Tax Benefits Statute and was the subject of subsequent amendments, also by Law of Parliament.

Without prejudice to the remission to the Law on Bases of Cultural Heritage with respect to the properties to which it is applicable, a decree which should be interpreted as any other law, in accordance with the legal hermeneutical factors, such exemption is unequivocally established in subsection n), of Article 44, of the Tax Benefits Statute (whose formal constitutionality the Claimant does not question), and not in the Law on Bases of Cultural Heritage, no unconstitutionality occurring, consequently, by violation of local autonomy, the principle of participation in the decision or organic unconstitutionality.

On the other hand, as Guilherme Waldemar d'Oliveira Martins writes:

"A rule that creates a tax benefit violates the principle of tax equality, but which, however is legitimized or even required by the constitutional norms of a given legal order"

(...)

"Tax benefits find foundation outside of contributory capacity and the principle of equality studied, without, however, the refusal of their admissibility occurring provided that they find their protection in another principle, right or duty" .

The tax benefit in question finds unequivocal foundation in Article 78, no. 2, subsection c), of the Constitution of the Portuguese Republic, no unconstitutionality occurring, therefore, by violation of the constitutional principles of tax equality, fiscal justice, contributory capacity and proportionality.

Being as it is, in accordance with the above, the assessment in question violates Article 44, no. 1, subsection n), of the Tax Benefits Statute, suffering, consequently, from the vice of violation of law, whereby it cannot fail to be annulled, as well as the decision that refused the request for official review.

1. The Claimant further came to request the condemnation of the Respondent to reimbursement of the amounts unduly collected, as well as the payment of compensatory interest that may be found due, pursuant to Article 43 of the General Tax Law.

In the case at issue, it is manifest that, following the illegality of the assessment acts, the Claimant's claim for restitution is well-founded by force of Articles 24, no. 1, subsection b), of the LRAT and 100 of the GTL, since such is essential to restore the situation that would have existed if the illegality in question had not been committed.

As regards compensatory interest, it is necessary to review this claim in light of Article 43 of the General Tax Law.

Paragraph 1 of that article provides that "Compensatory interest is due when it is determined, in a gracious claim or judicial challenge, that there was error attributable to the services resulting in payment of the tax debt in an amount greater than that legally due".

In turn, paragraph 3 of the same article provides:

"3 - Compensatory interest is also due in the following circumstances:

(...)

c) When the review of the tax act by initiative of the taxpayer is effected more than one year after the request thereof, except if the delay is not attributable to the tax administration."

As can be read in the judgment of the Supreme Administrative Court, of 24-10-2018, proceedings 099/18.3BALSB:

"With due deference, we hereby cite the judgment of this STA of 23/05/2018 aforementioned where it was expressed:

(...) 3.8. It is therefore necessary to address the question of whether compensatory interest is due from the date on which payment of the tax was made or from a year after the request for review formulated by the taxpayer.

We have seen that the founding judgment understood that the compensatory interest to which the claimants are entitled in this proceedings are only due from a year after the request for review formulated by them.

The judgment of 15-02-2007, proceedings 01041/06, of this STA has the following headnote:

"I - The official review of tax assessment acts may be prompted by the interested party, within the respective period, on the ground of any error, of fact or of law, attributable to the Administration.

II - When review of the tax assessment act is requested and the act is annulled, even if only in judicial challenge of the refusal of that review, compensatory interest is due after the lapse of one year from the initiative of the taxpayer, and not from the date of the disbursement of the amount assessed."

In this judgment various judgments that in this same sense pronounced themselves are referred to.

And the founding judgment followed this jurisprudential current affirming in its headnote the following:

"I - Article 43, no. 1 of the General Tax Law establishes that compensatory interest is due when it is determined, in a gracious claim or judicial challenge, that there was error attributable to the services resulting in payment of the tax debt in an amount greater than that legally due, without defining the moment from which the same is due.

II - No. 3, c) of the same provision establishes that compensatory interest is also due, 'when the review of the tax act by initiative of the taxpayer is effected more than one year after the request thereof, except if the delay is not attributable to the Tax Administration'.

III - The legislator considers that the period of one year is the reasonable period for the Administration to decide the request for review and execute the respective decision, when favourable to the taxpayer, moving away from full indemnification of damages from the moment they appeared in the patrimonial sphere of the taxpayer.".

From Article 43, no. 1, of the General Tax Law it results that compensatory interest is due when it is determined, in a gracious claim or judicial challenge, that there was error attributable to the services resulting in payment of the tax debt in an amount greater than that legally due.

It does not result from this rule what moment from which compensatory interest is due.

No. 3, c) of the same provision establishes, however, that compensatory interest is due, "when the review of the tax act by initiative of the taxpayer is effected more than one year after the request thereof, except if the delay is not attributable to the Tax Administration".

To the situation under review, paragraph 3, subsection c) of Article 43 of the General Tax Law is applicable since the respondent, having been able to question the assessment, chose to do nothing until the moment it submitted a request for official review of the tax act.

As written in the founding judgment between the date of the assessment and the date of the request for review a long period elapsed in which the restoration of legality could have been prompted by the initiative of the taxpayer that did not promote it, which justifies that the right to compensatory interest should have a more reduced extent as opposed to the situation in which the taxpayer raises the question of the illegality of the assessment act immediately after the payment of the amount in question since the legislator understood that the period of one year is the reasonable period for the Administration to decide the request for review and execute the respective decision, when favourable to the taxpayer, moving away from full indemnification of damages from the moment they appeared in the patrimonial sphere of the taxpayer.

Hence it can be concluded that this provision of Article 43, no. 3 c) of the GTL establishes a special regime, as regards compensatory interest, applicable only in situations of review, as is the case in the present proceedings and not before the typical normal situation in which the challenge of the assessment begins after payment.

One cannot invoke for the solution of the case of the present proceedings Article 57, no. 1 of the GTL since the obligation to conclude the procedure within four months (and previously six months) would lead to the inapplicability of the period of one year, contained in Article 43, no. 3 c) of the GTL.

It is therefore understood that the compensatory interest to which the respondent is entitled, in this proceedings, is only that due from one year after the request for review formulated, that is, from 28-03-2017.

Article 43, no. 3 c) of the GTL establishes a special regime, as regards compensatory interest, applicable only in situations of review of the tax act in which the same are due after the lapse of one year from the request for review.

(...)".

Agreeing with the expression of this judgment of the Plenary, whose grounds herein are brought, we are led to consider that the arbitral decision cannot be maintained in the measure of the interest determined, imposing its partial revocation. It should further be noted that this judgment follows jurisprudence drawn some time ago, specifically the judgment of 22/06/2005 drawn in appeal no. 322/05 where, with much clarity it was expressed:

(...) No. 3 further states that "compensatory interest is also due in the following circumstances:

…

c) When the review of the tax act by initiative of the taxpayer is effected more than one year after the request thereof, except if the delay is not attributable to the tax administration".And it is understood that it be so since if the taxpayer could on the ground of error attributable to the services question the assessment, pursuant to no. 1 of the aforementioned article 43, having, in such situation, should its claim succeed, right to compensatory interest calculated pursuant to no. 3 of article 61 of the TCPP (from the date of payment of the tax unduly paid to the date of the issuance of the respective credit note) if it let, possibly, pass the request for challenge and availed itself of the mechanism of review immediately became subject to the consequences of this legal mechanism.

For when it requests such review it is reasonable that the TA has a certain period to review it.

In this sense one can consult Jorge de Sousa, TCPP Annotated, 4th edition, 2003, notes 2 and 10 when he affirms that in article 61 it is foreseen that compensatory interest be paid when the review of the tax act by initiative of the taxpayer is effected more than one year after the request, if the delay is attributable to the Tax Administration, the starting point of calculation of such compensatory interest, in the case of review of the tax act by initiative of the taxpayer (outside the situations of gracious claims framed in no. 1 of the same article 43 of the GTL), due from one year after the submission of the request for review, possibly being counted from a later moment if the delay is not attributable to the Tax Administration.

And no inconstitutionality is seen in such legal provision, in the interpretation that is hereby left exposed, since the choice for the path of review that has this regime and not that of no. 1 of article 43 is only attributable to the private party that chose that path and not this one whereby no unconstitutionality defended of subsection c) of no. 2 of the same article 43 of the GTL occurs.

To contend that the application of the provision would be only for cases of success of the request for official review would constitute a limitation to the extent of the compensatory interest that has no verbal correspondence in the letter of the law and would function as "conditioning the decisional sense of the Administration" by burdening it with more extensive interest in the case of refusal of the request for review submitted well beyond the normal periods for challenge or gracious claim."

In accordance with this judgment, which is agreed with, the Claimant is entitled to compensatory interest, which are only those due from the end of the period of one year after the submission of the request for review formulated, that is, from 9 March 2019 until the date of processing of the respective credit note, in which they are included, pursuant to Article 61, no. 5, of the Code of Tax Procedure and Process.

IV – DECISION

Therefore, the arbitral tribunal decides:

a) To decree the annulment of the assessment that is the subject of the present proceedings as well as the decision refusing the request for official review submitted against it.

b) To condemn the Respondent to refund to the Claimant the amounts of tax paid relating to the assessment.

c) To condemn the Respondent to pay compensatory interest to the Claimant from 9 March 2019 until the date of processing of the respective credit note, in which they are included.

Value of the action: €35,845.33 (thirty-five thousand, eight hundred and forty-five euros and thirty-three cents) pursuant to Article 306, no. 2, of the CPC and 97-A, no. 1, subsection a), of the TCPP and 3, no. 2, of the Regulations of Costs in Arbitration Proceedings.

Costs by the Respondent, in the amount of €1,836.00 (one thousand eight hundred and thirty-six euros), pursuant to no. 4 of Article 22 of the LRAT.

Let notice be given.

Lisbon, CAAD, 12.03.2019

The Arbitrator

Marcolino Pisão Pedreiro