Summary
Full Decision
ARBITRAL DECISION
The Arbitrator Dr. Ana Luísa Ferreira Cabral Basto (sole arbitrator), designated by the Deontological Council of the Administrative Arbitration Centre ("CAAD") to constitute the Sole Arbitral Tribunal, established on 5 December 2018, decides as follows:
I. Report
A..., S.A., legal entity no..., with tax domicile at..., nos..., ..., ... – ... Évora, hereinafter referred to as the Claimant, filed a request for constitution of the Sole Arbitral Tribunal, pursuant to Decree-Law no. 10/2011 of 20 January (which establishes the Legal Framework for Arbitration in Tax Matters – hereinafter "RJAT"), with the AUTHORITY FOR TAX AND CUSTOMS (hereinafter also referred to as "AT") as the Respondent.
The request for constitution of the Sole Arbitral Tribunal aims at the annulment of the decision issued on 20 June 2018 by the Director of Finance of ..., dismissing the procedure for official review filed against the Municipal Property Tax ("IMI") assessment notices nos. 2016..., 2016... and 2016..., relating to the year 2016, in the total amount of €32,972.99 (thirty-two thousand, nine hundred and seventy-two euros and ninety-nine cents) and, consequently, the annulment of the aforesaid IMI assessment notices, relating to the first, second and third instalments, respectively, of the year 2016. The Claimant further petitions for the reimbursement of the tax, which it alleges was unduly paid, plus the respective compensatory interest, calculated at the legal rate in force.
On 25 September 2018, the request for constitution of the Arbitral Tribunal was accepted by His Excellency the President of the CAAD and was immediately notified to the Respondent in accordance with legal procedures.
The Claimant did not proceed to appoint an Arbitrator.
Thus, pursuant to the provisions of article 6(1) and article 11(1)(b) of the RJAT, by decision of His Excellency the President of the Deontological Council, duly communicated to the parties within the legally prescribed periods, Dr. Ana Luísa Ferreira Cabral Basto was designated as Arbitrator of the Sole Arbitral Tribunal, who communicated her acceptance of the assignment to the Deontological Council and the Administrative Arbitration Centre within the period set out in article 4 of the Code of Ethics of the Administrative Arbitration Centre.
In accordance with the provisions of article 11(1)(c) of the RJAT, the Sole Arbitral Tribunal was established on 5 December 2018, followed by the pertinent legal proceedings.
In summary, the grounds presented by the Claimant for the purposes of the arbitral award were as follows:
The IMI assessment notices, which are the subject of the annulment claim by the Claimant, fell upon properties located in the Historic Centre of Évora and, consequently, are classified as UNESCO World Cultural Heritage, as attested by certificates issued by the services of the Municipal Chamber of Évora.
In this sense, the Claimant considers that the IMI assessment notices, whose annulment is petitioned in the present request for arbitral award, are affected by errors in factual and legal assumptions attributable to the Respondent, and that the properties, which are the subject of the said IMI assessment notices, are exempt from this tax under paragraph n) of article 44(1) of the Tax Incentives Statute ("EBF"), which establishes the automatic application of the IMI exemption to "properties classified as national monuments and properties individually classified as being of public interest or municipal interest, in accordance with applicable legislation".
For the purposes of the legislation applicable to the classification of national monuments, the provisions of articles 15(2), 15(3) and 15(4) of the Law on the Basis of Cultural Heritage (rectius Law no. 107/2001, of 8 September) are relevant, the respective wording of which is transcribed as follows: "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 are monuments, ensembles or sites, the designation national monument shall be adopted (…) 4 – A property is considered of national interest when its respective protection and enhancement, in whole or in part, represents a cultural value of significance for the Nation". Moreover, pursuant to article 2(2) of Decree-Law no. 309/2009, of 23 October, "The classification of an immovable property may cover, in particular, rural properties and urban properties, buildings or other constructions incorporated into the ground with a character of permanence, as well as gardens, squares or pathways". Article 2(1) provides as follows: "An immovable property is classified in the categories of monument, ensemble or site, in the terms in which such categories are defined in international law".
On the other hand, from the content of the said Law on the Basis of Cultural Heritage (cf. article 15(7)), it further results that "immovable cultural property included in the world heritage list shall integrate, for all purposes and in their respective category, the list of property classified as of national interest".
Indeed, the Claimant argues that, based on the "applicable legislation" mentioned above, it follows that the inclusion of properties in the world heritage list has as an immediate consequence their classification as property of national interest and, consequently, as "national monuments".
The Claimant's position is further based on the fact that the Notice, dated 20 January 1988, from the Cultural Services Directorate, published in the Official Gazette, no. 39/1988, Series I, of 17 February 1988, made public that the Historic Centre of Évora — which, it should be noted, is considered as an "ensemble", being a whole for the purposes of recognition of protected heritage —, among others, was included in the UNESCO world heritage list.
Consequently, according to the Claimant, "there is no doubt that the properties in question are exempt from IMI, since the date of the above-identified Notice, in accordance with the provisions of paragraph n) of article 44(1) of the EBF and likewise, in article 15(3) of the Law on the Basis of Cultural Heritage".
In this sense, the Claimant identifies relevant case law for the present case, namely: the Judgment of the Central Administrative Court of the North, of 6 January 2017, issued in the context of case no. 00693/14.1BEPRT and the Judgment of the Central Administrative Court of the North, issued in the context of case no. 0134/14.4BEPRT, of 7 December 2016 (corroborated by the Central Administrative Court of the South, in a Judgment issued on 8 June 2017, in the context of case no. 09284/16), as well as the arbitral decisions issued by the CAAD, in particular, in the context of Case no. 405/2017-T, of 21 December 2018.
In light of the above, the Claimant petitions for the annulment of the decision issued on 20 June 2018 by the Director of Finance of ..., dismissing the procedure for official review filed against the IMI assessment notices nos. 2016..., 2016... and 2016..., relating to the year 2016, in the total amount of €32,972.99 and, consequently, the annulment of the said assessment notices, with the corresponding reimbursement of the tax, plus the respective compensatory interest.
The AT contested the Claimant's claim, presenting a defence, by exception and by challenge, based on the following grounds, which are briefly set out below.
By exception:
The Arbitral Tribunal is incompetent to consider the dismissal of the request for official review of a tax act, insofar as the consideration of such matter goes beyond the competences reserved to it by law.
The request for arbitral award has as its object, albeit mediately, the assessment of IMI, insofar as it was the subject of official review of a tax act, and was not preceded by administrative challenge, in accordance with articles 131 to 133 of the Code of Tax Procedure and Process ("CPPT").
Now, according to the Respondent, it follows from article 2(a) of Ordinance no. 112-A/2011, of 22 March, that the mechanism of official review of a tax act is excluded from the scope of the Respondent's binding to arbitral jurisdiction – mandatory pursuant to article 4(1) of the RJAT – and, consequently, there is material incompetence of the Arbitral Tribunal to consider the IMI assessment inherent to the request for official review of a tax act which, constituting a dilatory exception, prevents the continuation of the proceedings and leads to the dismissal of the claims regarding the claim in question, in accordance with articles 576(1), (2) and 577(a) of the Code of Civil Procedure ("CPC"), pursuant to article 29(1)(e) of the RJAT.
By challenge:
The Respondent introduces, for the purposes of its argument, the distinction of the various concepts evident in article 15 of the Law on the Basis of Cultural Heritage, in particular the following three legal-patrimonial concepts regarding immovable cultural property, namely: the category (monument, ensemble and site), the classification (national interest, public interest and municipal interest) and the designation (national monument, applicable only to monuments, ensembles or sites classified as being of national interest).
According to the Respondent, since 2001, that is, since the entry into force of the Law on the Basis of Cultural Heritage, there is no classification called "national monument", but only classifications called "national interest", "public interest" or "municipal interest", and it is manifestly impossible to assert that the Historic Centre of Évora is classified as a National Monument.
Having said this, the Respondent continues its thesis in the sense of disregarding that there is no UNESCO classification called "World Heritage", "UNESCO Heritage", "World Heritage" or any equivalent expression, arguing that by inscribing a cultural property on the "World Heritage List", the UNESCO World Heritage Committee is not classifying a property, since it would not have the competence to carry out an administrative classification procedure regarding the Historic Centre of Évora.
The Respondent considers that the classification of a cultural property always depends on a prior administrative classification procedure, in accordance with the Administrative Procedure Code ("CPA"), the Law on the Basis of Cultural Heritage and Decree-Law no. 309/2009, of 23 October (regulation establishing the procedure for classification of immovable property of cultural interest, as well as the regime of protected areas and the detailed safeguard plan), in particular, and with relevance to the present case, resulting from the provisions of article 72 of this Decree-Law.
According to the Respondent, "As a cultural property inscribed in the 'UNESCO World Heritage List', the so-called Historic Centre of Évora is, at most, classified as property of National Interest, being designated as a National Monument" (bold and underlined by the Respondent – cf. article 158 of the Response to the request for arbitral award). And, "the graduation of National Monument classification evident in article 24 of Decree 20.985 DOES NOT confuse with or is equivalent to the concept of designation of National Monument evident in article 15/3 of the LBPC" (bold and underlined by the Respondent – cf. article 155 of the Response to the request for arbitral award).
Thus, the Historic Centre of Évora not being classified as a "national monument", but only designated as such, the exemption provided for in paragraph n) of article 44(1) of the EBF does not apply here, referring to the first segment of the rule to properties classified as "national monuments" in the light of the laws of the New State that preceded the Law on the Basis of Cultural Heritage.
Even if it were considered that the inscription of the Historic Centre of Évora in the "UNESCO World Heritage List" constitutes a classification and that this corresponds to the graduation of "national monument", it would constitute an abusive interpretation the conclusion that the properties in question, merely by being located within that ensemble, are likewise classified as "national monument".
The exemption set out in article 44(1)(n) of the EBF, because it can only be directed at tax properties (article 2 of the IMI Code), requires individual classification of the properties, regardless of the patrimonial category in which they are inserted (i.e., monument, ensemble and site).
The understanding that any and every property, merely and solely by virtue of being located within the perimeter of either a classified ensemble or a cultural landscape, is also itself individually classified and able to benefit from the IMI exemption, by force of article 44(1)(n) of the EBF, in conjunction with article 15(3) and (7) of the Law on the Basis of Cultural Heritage, and with article 3(3) of Decree-Law no. 309/2009, corresponds to an interpretation contrary to the constitutional principles of tax equality, fiscal justice, taxpaying capacity and proportionality.
The Respondent concludes that, by way of article 15(7) of the Law on the Basis of Cultural Heritage, the constitutional principle of participation (article 268(3) of the Constitution of the Portuguese Republic – "CRP") was also disrespected, in this case in the sphere of the Municipality of Évora, in the formation of the classification decision, this Municipality having been harmed in its local autonomy (articles 235 and 238 of the CRP), insofar as it had no say in the question of the loss of IMI revenue, underlying the area of the Historic Centre of Évora.
The equivalence or equation between the classifications provided for in New State legislation and those provided for in the Law on the Basis of Cultural Heritage suffers from unconstitutionality, that is, the equivalence between the "national monument" classification (provided for by Decree no. 20.3985 of 1932) and the "national interest" classification (provided for by article 15(2) of the Law on the Basis of Cultural Heritage), not least because the equivalence must result directly from a Law of Parliament or an authorized Government Decree-Law, insofar as classification is one of the systems of patrimonial protection adopted by the Law on the Basis of Cultural Heritage and, as such, the definition of its basis is constitutionally reserved to the National Assembly, save for authorisation from the latter to the Government.
The Claimant replied, in writing, to the exception raised by the Respondent, in the following terms:
Paragraph a) of article 2 of Ordinance no. 112-A/2011, of 22 March, only concerns self-assessment acts – and not assessment acts, as is the case with an IMI assessment.
Even if this were not so, the Supreme Administrative Court (e.g., Judgment of the Supreme Administrative Court, of 12 July 2006, issued in the context of case no. 0402/2006) has repeatedly defended the equation between the request for official review of the tax act and the necessary gracious complaint. This equation is not prohibited in arbitration, as understood by Carla Castelo Trindade – which the Claimant supports – who states that "Excluding arbitral jurisdiction merely because the means used was not effectively a gracious complaint would violate the principle of effective judicial protection, as enshrined in article 20 of the CRP" (cf. Trindade, Carla Castelo, "Legal Framework for Tax Arbitration Annotated", Almedina, 2016).
In support of the above, see also the arbitral decision, dated 10 January 2012, issued in the context of case no. 65/2012-T, which concludes as follows: "(…) having reached the conclusion that the formula used in article 2(1)(a) of the RJAT does not exclude cases in which the declaration of illegality results from the illegality of a second-instance act, it will also cover cases in which the second-instance act is the dismissal of a request for review of the tax act, as there is no reason to restrict, all the more so since, in cases where the review request is made within the period of administrative complaint, it should be equated with a gracious complaint. It is thus concluded, in keeping with the aforementioned rulings, "that there is no obstacle to obtaining the declaration of illegality of source deduction withholding acts, in arbitral proceedings, through the declaration of illegality of acts dismissing requests for official review" (…)".
In light of the above, the dilatory exception of material incompetence of the Arbitral Tribunal to consider the IMI assessment subject to the request for official review, invoked by the Respondent in its Response, should be dismissed, since the competence of the Arbitral Tribunal established to hear the request formulated by the Claimant in the present proceedings has been fully demonstrated.
By order of 8 February 2019, it was decided to dispense with the meeting provided for in article 18 of the RJAT and to proceed with the proceedings to the stage of optional written submissions.
In light of the above, the following issues must be addressed:
1. Incompetence of the Arbitral Tribunal;
2. Illegality of the decision that dismissed the request for official review and the IMI assessments subject to the present proceedings;
3. The Claimant's right to reimbursement of the tax paid;
4. The Claimant's right to compensatory interest.
Insofar as the success of the exception invoked by the Respondent, should it be verified, prevents consideration of the merits of the case, after the determination of the facts, it shall be considered, in accordance with article 13 of the Code of Procedure in Administrative Courts ("CPTA"), subsidiarily applicable, pursuant to article 29(1)(c) of the RJAT.
II – Statement of Facts
II.1. Proven Facts
The Claimant is the owner of the following urban properties, which are the subject of the IMI assessment notices considered here:
1. Land for construction, identified with matricial article no...., of the Union of Parishes of ..., located at..., no...., ...– ... Évora (in the Historic Centre of Évora), with a Tax Property Value ("VPT") of € 728,878.90;
2. Property under the horizontal property regime, identified with matricial article no...., autonomous fraction ..., of the Union of Parishes of ..., located at..., no...., ...- ... Évora, with a VPT of € 947,612.16;
3. Property under the horizontal property regime, identified with matricial article no...., autonomous fraction ..., of the Union of Parishes of ..., located at..., no...., ... - ... Évora, with a VPT of € 57,280.00;
4. Property under the horizontal property regime, identified with matricial article no...., autonomous fraction ..., of the Union of Parishes of ..., located at..., no...., ...-... Évora, with a VPT of € 77,840.00; and
5. Property under total ownership without storeys or divisions capable of independent use, identified with matricial article no...., of the Union of Parishes of ..., located at..., nos. ... to ..., ...-... Évora, with a VPT of € 5,515,719.71.
The Claimant proceeded to pay the first, second and third instalments of the IMI assessment notice in question here, respectively, on 27 April 2017, on 20 July 2017 and on 27 September 2017.
The aforementioned properties, located at..., nos. 4 to 6 and at... Street, nos.... to ..., in Évora, are located in that ensemble designated as the Historic Centre of Évora, thus being integrated into the classification as UNESCO World Cultural Heritage.
The Claimant, on 8 February 2018, filed a request for official review (which gave rise to procedures identified under nos. ...2018..., ...2018... and ...2018...) against the IMI acts nos. 2016..., 2016... and 2016..., relating to the year 2016, in the total amount of €32,972.99.
The said request for official review was dismissed on 20 June 2018, by decision notified to the Claimant by registered mail with advice of receipt sent on 22 June 2018 and the respective notice signed on 25 June 2018 – decision whose content contained in pages 66 to 66 of the administrative proceedings contained in the file is hereby fully reproduced for all legal purposes.
II.2. Unproven Facts
There are no facts relevant to the decision of the case that have not been proven.
II.3. Rationale for the Statement of Facts
The proven facts are based on the documents attached by the Claimant to the request for arbitral award and on the administrative proceedings.
With regard to proof of the fact that the properties in question are located in the area delimited as the Historic Centre of Évora, the certificates issued by the Municipal Chamber of Évora were relevant, as were the express statements made by the Respondent in the administrative proceedings – cf. pages 55, 59 and 65 of the decision that dismissed the request for official review.
III – Sanitation
III.1. Preliminary Issue – Material Incompetence of the Arbitral Tribunal
In accordance with article 13 of the CPTA, pursuant to article 29(1)(c) of the RJAT, "The scope of administrative jurisdiction and the competence of administrative courts, in any of its forms, is a matter of public order and its consideration takes precedence over any other matter".
Mário Aroso de Almeida and Carlos Alberto Fernandes Cadilha state that "The attribution of absolute priority to the consideration of the question of competence is justified by the consideration that the only question for which an incompetent court is competent is to consider its incompetence. Once that incompetence is verified, it becomes naturally prevented from entering into consideration of either the remaining procedural prerequisites or, obviously, the merits of the case" (cf. Commentary to the Code of Procedure in Administrative Courts, 4th edition, Almedina, Coimbra, 2017, page 147).
Therefore, the exception of material incompetence raised by the Respondent shall be considered forthwith, being certain that if this question is successful, the consideration of the merits of the case will be rendered moot and unnecessary.
In considering the issues relating to the request for official review of the act, it is first necessary to clarify whether the consideration of acts dismissing requests for review of the tax act, provided for in article 78 of the General Tax Law ("LGT"), is included in the competences attributed to arbitral courts operating at the CAAD by article 2 of the RJAT.
In fact, in this article 2 no express reference is made to these acts, contrary to what happens with the legislative authorization on which the Government based itself to approve the RJAT, which refers to "requests for review of tax acts" and "administrative acts that entail the consideration of the legality of assessment acts". However, as is, for example, advocated in the arbitral decision, dated 10 January 2012, issued in the context of case no. 65/2012-T, "the formula «declaration of illegality of acts of assessment of tributes, of self-assessment, of source deduction withholding and of payment on account», used in article 2(1)(a) of the RJAT, 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 challenged. In fact, the illegality of assessment acts can be declared jurisdictionally as a corollary of the illegality of a second-instance act, which confirms an assessment act, incorporating its illegality. The inclusion in the competences of arbitral courts operating at the CAAD of cases in which the declaration of illegality of the acts indicated there is made through the declaration of illegality of second-instance acts, which are the immediate object of the impugning claim, results with certainty from the reference made in that rule to acts of self-assessment, source deduction withholding and payment on account, which are expressly referred to as being included among the competences of arbitral courts. In fact, with respect to these acts, gracious complaint is imposed, as a rule, required by articles 131 to 133 of the CPPT, so that in these cases the immediate object of the impugning proceedings is, as a rule, the second-instance act that considers the legality of the assessment act, an act that, if it confirms it, must be annulled in order to obtain the declaration of illegality of the assessment act. The reference made in article 2(1)(a) of article 10 of the RJAT to article 102(2) of the Code of Tax Procedure and Process, which provides for the challenge of acts dismissing gracious complaints, dispels any doubts that the competences of arbitral courts operating at the CAAD cover cases in which the declaration of illegality of the acts referred to in article 2(a) of the RJAT must be obtained following the declaration of the illegality of second-instance acts. Indeed, it was precisely in this sense that the Tax Authority, through Ordinance no. 112-A/2011, of 22 March, interpreted these competences of the arbitral courts operating at the CAAD, by excluding from the scope of these competences the «claims relating to the declaration of illegality of acts of self-assessment, source deduction withholding and payment on account that have not been preceded by recourse to the administrative route in accordance with 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 route has been used".
"Thus, having reached the conclusion that the formula used in article 2(1)(a) of the RJAT does not exclude cases in which the declaration of illegality results from the illegality of a second-instance act, it will also cover cases in which the second-instance act is the dismissal of a request for review of the tax act, as there is no reason to restrict, all the more so since, in cases where the review request is made within the period of administrative complaint, it should be equated with a gracious complaint (…)".
Notwithstanding the rationale set out above, it is important to emphasize that paragraph a) of article 2 of Ordinance no. 112-A/2011, of 22 March, only concerns self-assessment acts – and not assessment acts, as is the case with an IMI assessment.
In this sense, the Collective Tribunal that issued the arbitral decision in the context of case no. 46/2017-T, of 5 July 2017, decided: "In the case at hand, assessment acts and not self-assessment, source deduction withholding or payment on account acts are at issue. Therefore, the said paragraph a) of article 2 of Ordinance 112-A/2011, of 22 March, has no application in the case at hand. The legality of IMI assessment acts can be considered by arbitral courts, by force of article 2(1)(a) of the RJAT, regardless of whether or not they have been the subject of gracious complaint or request for official review or hierarchical remedy, as there is no limitation, either in the RJAT or in Ordinance no. 112-A/2011, of 22 March".
In light of the above, it is decided to dismiss as unfounded the exception of incompetence of the Arbitral Tribunal raised by the Respondent.
III.2. Remaining Procedural Prerequisites
The Tribunal was regularly established in accordance with the RJAT.
The request for arbitral award is timely, because it was presented within the period provided for in article 10(1)(a) of the RJAT.
The parties have legal capacity and standing, are legitimate and are duly represented (articles 4 and 10(2) of the RJAT and article 1 of Ordinance no. 112-A/2011, of 22 March).
The proceedings do not suffer from any nullities.
IV – Matter of Law
The Claimant seeks the application of the IMI exemption provided for in paragraph n) of article 44(1) of the EBF, relating to "properties classified as national monuments and properties individually classified as being of public interest or municipal interest, in accordance with applicable legislation".
The current wording of this provision was originally added by article 45 of Law no. 109-B/2001, of 27 December, to the then article 40 of the EBF, which provided for the exemption from, at that time, the municipal contribution to "properties classified as national monuments and likewise those classified as property of municipal value or as cultural heritage, in accordance with applicable legislation".
It should be noted that the first relevant amendment to this provision (still, at that time, corresponding to article 40 of the EBF) is made through the State Budget Law for 2007, that is, Law no. 53-A/2006, of 29 December, pursuant to which the following are exempt from IMI: "Properties classified as national monuments and properties individually classified as being of public interest, of municipal value or cultural heritage, in accordance with applicable legislation". This version, in part, corresponds to the current version of paragraph n) of article 44(1) of the EBF and that, insofar as it coincides with it, it is important to analyse within the scope of the present proceedings, for the reasons which follow.
As can be inferred from the joint interpretation of these legal provisions – and following the understanding endorsed by the Supreme Administrative Court through the judgment dated 12 December 2018, which confirms the learned Judgment of the Central Administrative Court of the North issued in the context of case no. 0134/14.4BEPR – "the legislator, when preparing the State Budget for 2007, intended to introduce a significant change in the regime for access to IMI exemptions that could benefit properties classified by reason 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 property, being content, therefore, with its classification in accordance with applicable legislation, with this amendment it came to require an additional requirement, that of individual classification in accordance with applicable legislation. However, it only came to require this individual classification for properties that should be integrated into the categories of public interest, municipal value or cultural heritage [it being noted that this last expression does not appear in the current wording of paragraph n) of article 44(1) of the EBF)], not making the same requirement for properties that should be integrated into the category of national monument (in the EBF the legislator makes reference to national monument when it is intended to refer to property of national interest because this is how, pursuant to the provisions of article 15(3) of Law no. 107/2001, of 08 September, they should be designated)".
Whereby the Supreme Administrative Court concludes that "(...)the legislator did not intend to require, for property to be included in the category of national monument (national interest) and for the purposes of this tax exemption, that they should be subject to individual classification, thereby maintaining, in respect thereof, the regime that was previously established". And that "This interpretation also results expressly from the parliamentary debate and voting that took place regarding this legal provision" at that time.
In light of the above, it is concluded that the amendment put forward by Law no. 53-A/2006, of 29 December, to the then article 40(1)(n) (current article 44) of the EBF applies only to properties that are not included in the "ensemble" category, whose "national interest" classification operates ope legis, and determines their designation as "national monument" – as will be explained more clearly below.
Notwithstanding the above, the AT argues that the expression "properties classified as national monuments" refers to properties that were classified as national monuments under the legislation in force prior to the Law on the Basis of Cultural Heritage (Law no. 107/2001, of 8 September), as this provides for the category of "monument" (whose designation may be "national monument"), but not for the classification as "national monument", in accordance with articles 15(1) and (2) of the Law on the Basis of Cultural Heritage.
Indeed, the AT states, in summary, in its submissions presented within the scope of the present proceedings, that "With the entry into force of the LBPC in 2001, the Classification of National Monument (created by Decree-Law 20.895 of 1933) ceased to exist, giving rise to the classifications of National Interest, Public Interest and Municipal Interest" (cf. point 19 of the submissions made by the Respondent).
In this context, and now referring to the Response presented by the Respondent to the request for arbitral award under analysis, the latter understands that, the Historic Centre of Évora not being classified as a "national monument", but only designated as such, the exemption provided for in paragraph n) of article 44(1) of the EBF does not apply here, referring to the fact that "the 1st segment of article 44/1-n) of the EBF refers to properties classified as National Monuments in the light of New State laws that preceded the LPBC" (cf. article 162 of the Response presented by the Respondent to the request for arbitral award).
In this regard, it is important to clarify that article 44(5), in the wording of Law 3-B/2010, of 28 April[1], when it refers to "communication of classification as national monuments", manifestly refers to communications that may occur after its entry into force, whereby this expression should be interpreted as referring to immovable property to which the designation of "national monument" is assigned. In fact, this communication was not provided for, in these terms, in the previous wording, so it would not be understood that it was referring to communications relating to monuments classified prior to the entry into force of the Law on the Basis of Cultural Heritage. In this context, if legislatively it were intended to allude only to monuments classified prior to Law no. 107/2001, express reference would certainly be made. In the absence of such reference, it should be concluded that the first part of the exemption referred to covers properties classified as national monuments that were not the subject of individual classification.
In the same sense, article 53(1) of the Law on the Basis of Cultural Heritage refers to "the act that decrees the classification of monuments", whereby it is beyond doubt that, under this regulation, there is "classification of monuments". Therefore, the initial part of paragraph n) of article 44(1) of the EBF should be interpreted as referring to "properties classified as national monuments" under that Law on the Basis of Cultural Heritage, inclusive.
And, as "national monuments" should all "immovable property classified as of national interest, whether they are monuments, ensembles or sites" be considered, since article 15(3) of the Law on the Basis of Cultural Heritage and article 3 of Decree-Law no. 309/2009, of 23 October, expressly assign that designation to all of them. That is, for the purposes of paragraph n) of article 44 of the EBF, "properties classified as national monuments" are the properties to which that designation is assigned.
Being the "properties individually classified as being of public interest or municipal interest" expressly referenced in that paragraph n) of article 44(1) of the EBF, the useful scope of the initial reference to "properties classified as national monuments" will consist in extending the exemption to properties that are not the subject of individual classification, in particular those incorporated into "monuments, ensembles or sites", referred to in article 15(3) of the Law on the Basis of Cultural Heritage, to which the designation of "national monument" is attributed, which is used in paragraph n) of article 44(1) of the EBF.
Insofar as article 15(7) of the Law on the Basis of Cultural Heritage provides that "property included in the world heritage list shall integrate, for all purposes and in their respective category, the list of property classified as of national interest", it is concluded that, from the entry into force of this Law, the inclusion of property in the world heritage list has as a consequence its classification as national interest, thus becoming in all respects integrated into the list of property classified as national interest.
In this sense, the Respondent's argument that the classification of a cultural property always depends on a prior administrative classification procedure, in accordance with the Administrative Procedure Code, the Law on the Basis of Cultural Heritage and Decree-Law no. 309/2009, of 23 October, in particular, and with relevance to the present case, resulting from the provisions of article 72 of this Decree-Law, does not hold.
The present Tribunal considers that, unless a better view is forthcoming, the provisions of article 72 of Decree-Law no. 309/2009, of 23 October, which entered into force on 1 January 2010, would not be applicable to the disputed case. Note that even if the interpreter of the law were to concede the application of this article to the case at hand, for reasons of untimeliness and, above all, for teleological reasons, it would not be possible to understand that a reality already definitively inscribed in the World Heritage List could be the subject of an administrative act merely conducive to "the inclusion of immovable property in the indicative list of world heritage", as this proves impossible to be carried out with regard to a property that is already included in the world heritage list – as is the case of the Historic Centre of Évora, since 26 November 1986 – and not in the indicative list of world heritage.
Note that, in accordance with article 11(1) of the UNESCO Convention for the Protection of World Cultural and Natural Heritage (approved for accession by Decree-Law no. 49/79, of 6 June), "Each State party to this Convention shall, to the fullest extent possible, submit to the World Heritage Committee an inventory of property of cultural and natural heritage situated in its territory and capable of being inscribed in the list provided for in paragraph 2 of this article. Such an inventory, which shall not be considered exhaustive, shall include documentation concerning the location of the property in question and the interest it presents". Now, the indicative lists referred to in this provision constitute an indispensable prerequisite for the candidacy of property for world heritage. And, as such, they must not be confused with the lists, let us call them final, which integrate property on the World Heritage List.
In fact, it cannot be left unsaid that, in accordance with article 15(7) of the Law on the Basis of Cultural Heritage, "Immovable cultural property included in the world heritage list shall integrate, for all purposes and in their respective category, the list of property classified as of national interest", the applicable designation of which is "national monument" and which, in the present case, applies to an "ensemble" in which the Historic Centre of Évora is inserted and, therefore, to the properties existing therein.
In light of the above, the present Tribunal considers that the classification as national interest of immovable cultural property included in the world heritage list results from the law – i.e., from article 15(7) of the Law on the Basis of Cultural Heritage – and that from this classification results the designation of "national monument" (cf. article 15(3) of the Law on the Basis of Cultural Heritage).
In this sense, note the judgment of the CAAD issued in the context of case no. 46/2017-T, of 5 July 2017: "the opening of a classification procedure that entails the inclusion of an immovable property in the indicative list of world heritage, in accordance with article 72(1) of Decree-Law no. 309/2009, of 23 October, is not intended to consider whether the conditions for classification are met, nor to render a final decision by the Government, in accordance with article 30(1) of the same regulation (as the classification is already made «for all purposes» by force of article 15(7) of Law no. 107/2001), but only to identify which immovable properties have been included in that list, in particular through a location map, and to fix the respective special protection zone. It is in this context that, with respect to properties inscribed on the world heritage list at the date of entry into force of Decree-Law no. 309/2009, article 72(3) thereof provides only for publication in the form of a notice in the Official Gazette, of the location map and implementation of the immovable property inscribed on the world heritage list, including the respective protection zone, and not a decision by the Government in the form of a decree, as provided for in article 30(1) thereof, for final decisions in the classification proceedings of immovable property as of national interest. Thus, with respect to properties inscribed on the world heritage list prior to the entry into force of Decree-Law no. 309/2009, there is no place for any act of classification, and they are integrated «for all purposes and in their respective category, the list of property classified as of national interest», by force of article 15(7) of Law no. 107/2001. Therefore, in relation to these properties inscribed on the world heritage list, there is no place for «communication of classification as national monuments (...) to be carried out by the Institute for Management of Architectural and Archaeological Heritage, I. P.»[1] which is referred to in article 44(5) of the EBF, as there is no place for classification to be communicated. Thus, in these cases, the exemption operates automatically, following publication of the notice provided for in article 72(3) of Decree-Law no. 309/2009. However, the exemption in question covers only the "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(1) and 3(2) of Decree-Law no. 309/2009)".
Indeed, the UNESCO World Heritage Committee is not, in fact, classifying a property – a statement made by the Respondent (cf. article 140 of the Response to the Request for arbitral award) and with which the present Tribunal fully agrees – not least because, as referred to above, in the disputed case, there is no place for any classification act applicable to properties inscribed on the world heritage list – as is the case of the ensemble to which the Historic Centre of Évora relates – insofar as they are integrated "for all purposes and in their respective category, the list of property classified as of national interest", by force of article 15(7) of the Law on the Basis of Cultural Heritage.
Consequently, the Respondent's argument regarding the conclusion that the existence of an alleged classification "CAN ONLY be made by the General Heritage Directorate" (cf. point 79 of the submissions made by it within the scope of the present proceedings) cannot proceed. In fact, and as mentioned above, "in relation to these properties inscribed on the world heritage list, there is no place for «communication of classification as national monuments (...) to be carried out by the Institute for Management of Architectural and Archaeological Heritage, I. P.»[1] which is referred to in article 44(5) of the EBF, as there is no place for classification to be communicated" (an understanding endorsed by the panel of judges of the CAAD in case no. 46/2017-T, of 5 July 2017).
It is thus reiterated that, given paragraph n) of article 44 of the EBF, the properties forming part of ensembles designated "national monument" benefit from the exemption provided for there, not requiring individual classification for that purpose.
To ascertain this relevant fact, the certificates issued by the Municipal Chamber of Évora – a copy of which was provided by the Claimant together with the request for arbitral award – are indeed relevant, insofar as they attest that the properties in question, located at Travessa da Palmeira, nos. 4 to 6 and at Rua Cândido dos Reis, nos. 72 to 78, in Évora, are located in the ensemble designated as the historic centre of Évora, thus being integrated into the classification as UNESCO World Cultural Heritage.
Note, once more, and for the same reasons set out above, that these certificates do not result from a classification act (which in the case at hand does not need to be carried out), but rather from an act of recognition, by the Municipal Chamber of Évora, of the location of the property and of the consequences inherent in the scope of IMI, which enables the Claimant to demonstrate the prerequisites for its tax benefit, thus fulfilling the provisions of article 74(1) and article 14(2) of the LGT. It is noted that, as already referred to, the IMI exemption in question is automatic in nature, and the requirement for communication provided for by article 44(5) of the EBF will not be applicable to the case at hand.
In these terms, it has been demonstrated that the Historic Centre of Évora was included in the UNESCO World Heritage List, a fact publicized in the Notice of the Cultural Services Directorate, of 20 January 1988, published in Official Gazette no. 39/1988, Series I, of 17 February 1988 - a fact of public knowledge and, as such, of knowledge of the AT.
It should also be noted that the understanding now set out follows the understanding endorsed in the Judgment of the Central Administrative Court of the North, of 1 June 2017, issued in the context of case no. 00693/14.1BEPRT, in which it was decided that "(…) property located in Historic Centres included in the UNESCO World Heritage List are classified as being of national interest, falling within the category of "national monuments" and thus benefiting, consequently, from the exemption enshrined in paragraph n), of article 44(1), of the Tax Incentives Statute".
In the same sense, mention should also be made of the Judgment of the Central Administrative Court of the North, of 7 December 2016, issued in the context of case no. 0134/14.4BEPR: "(…) In fact, and in accordance with article 15 of Law no. 107/2001, of 8 September, and article 3 of Decree-Law no. 309/2009, of 23 October, property classified as of national interest is designated as a "national monument", regardless of whether it is a single building, ensemble or site, it being clear that the properties that make up the ensemble or site are covered by that classification. The fact that individually classified properties may coexist, in the event of delineation of an ensemble or a site, in accordance with article 56 of Decree-Law no. 309/2009, of 23 October, is only provisionally relevant for delimiting the protection zone of that property until publication of the classification of the ensemble or site (cf. (2)). For this reason it is understood that article 44 of the Tax Incentives Statute distinguishes between "property classified as national monument" and "property individually classified as being of public or municipal interest", only requiring individualisation in relation to these two latter categories, but not in relation to national interest property. (…)".
This understanding was recently corroborated by the Supreme Administrative Court, through the judgment dated 12 December 2018, confirming the learned Judgment mentioned above, and, consequently, confirming that "Properties designated as national monuments in accordance with the provisions of article 44(1)(n) of the Tax Incentives Statute are exempt from municipal property tax".
As regards the unconstitutionality issues raised by the Claimant, it is gratifying to point out the following, already supporting the judgment of the CAAD issued in the context of case 470/2018-T, of 12 March 2019 – a copy of which was attached to the present proceedings by the Claimant and where the same issues as those which are in discussion in the present proceedings were discussed:
"As for the unconstitutionality issues raised by the Respondent, it should be recalled and emphasized that the exemption in question was inserted by Law no. 109-B/2001, of 27.12, in the Tax Incentives Statute and was the subject of subsequent amendments, also by Act of the National Assembly. Without prejudice to the reference to the Law on the Basis of Cultural Heritage as regards the property to which it applies, a regulation that should be interpreted like any other law, in accordance with hermeneutical factors, such exemption is unequivocally established in paragraph n), of article 44, of the Tax Incentives Statute (the formal constitutionality of which the Claimant does not question), and not the Law on the Basis of Cultural Heritage, thus not occurring any unconstitutionality by violation of local autonomy, the principle of participation in decision or organic bodies".
"On the other hand, as Guilherme Waldemar d' Oliveira Martins argues: "A rule that creates a tax benefit violates the principle of tax equality, but which is nevertheless legitimized or even required by the constitutional rules of a given legal system". (…) Tax benefits find their foundation outside taxpaying capacity and maximum equality studied, without, however, refusing their admissibility provided they find their protection in another principle, right or duty" (in Tax Benefits: System and Framework, IDEFF Notebooks, no. 6, 2006, Almedina, pages 24, 31-32).
It is thus concluded that "The tax benefit in question finds unequivocal foundation in article 78(2)(c) of the Constitution of the Portuguese Republic, thus no unconstitutionality occurring by violation of the constitutional principles of tax equality, fiscal justice, taxpaying capacity and proportionality" (cf. judgment of the CAAD issued in the context of case 470/2018-T, of 12 March 2019).
In light of the above, it has been demonstrated that the properties in relation to which the Claimant seeks to apply the IMI exemption are classified as "national monuments", as a result of their location in the area of the Historic Centre of Évora and, consequently, it has been demonstrated that the assessments and the decision dismissing the request for official review are affected by illegality and should be annulled, in accordance with the provisions of article 163 of the Administrative Procedure Code.
V – Request for Reimbursement and Compensatory Interest
As a consequence of the illegality of the assessment acts, the Claimant's claim for restitution of the IMI tax instalments paid by it is considered well-founded, by force of articles 24(1)(b) of the RJAT and 100 of the LGT.
With regard to compensatory interest, it is important to consider this request in the light of article 43 of the LGT, and in accordance with article 43(1) thereof, "[c]ompensatory interest is due when it is determined, in a gracious complaint or judicial challenge, that there was an error attributable to the services resulting in payment of the tax debt in an amount exceeding what is legally due".
However, pursuant to article 43(3)(c), compensatory interest is also due "[w]hen the revision of the tax act at the initiative of the taxpayer is carried out more than one year after the request thereof, except where the delay is not attributable to the tax authority".
Now, on this matter, what has been the prevailing case law is relevant to the decision, and it is important to note the understanding endorsed by the Supreme Administrative Court, in particular, in the judgment dated 24 October 2018, issued in the context of case 099/18.3BALSB.
Pursuant to the learned judgment:
"With due permission we here cite this STA judgment of 23/05/2018 referred to above where it was stated:
(...) 3.8. It is therefore necessary to address the question of whether compensatory interest is due from the date the tax payment was made or from one year after the review request submitted by the taxpayer.
We have already seen that the foundational judgment understood that the compensatory interest to which the appellants are entitled in this process is only due from one year after the review request submitted by them.
The judgment of 15-02-2007, case 01041/06, of this STA has the following summary:
"I - The official review of assessment acts is capable of being provoked by the interested party, within the respective period, on the grounds of any error, of fact or of law, attributable to the Administration.
II - Once official review of the assessment act is requested and the act comes to be annulled, even if only in the judicial challenge of the dismissal of that review, compensatory interest is due after one year following the initiative of the taxpayer, and not from the date of the disbursement of the assessed amount.".
In this judgment the various judgments that pronounced themselves in this same sense are referred to.
And the foundational judgment followed this case law current by affirming in its summary the following:
"I - Art. 43(1) of the General Tax Law establishes that compensatory interest is due when it is determined, in a gracious complaint or judicial challenge, that there was an error attributable to the services resulting in payment of the tax debt in an amount exceeding what is legally due, without defining the moment from which the same is due.
II - Article 43(3)(c) of the same provision provides that compensatory interest is also due, «when the revision of the tax act at the initiative of the taxpayer is carried out more than one year after the request thereof, except where the delay is not attributable to the Tax Authority».
III - The legislator considers that the period of one year is the reasonable period for the Administration to decide on the review request and execute the respective decision, when favourable to the taxpayer, moving away from total indemnification of damages from the moment they arose in the patrimonial sphere of the taxpayer.
From article 43(1) of the General Tax Law it results that compensatory interest is due when it is determined, in a gracious complaint or judicial challenge, that there was an error attributable to the services resulting in payment of the tax debt in an amount exceeding what is legally due.
It does not follow from this rule what the moment from which compensatory interest is due is.
However, article 43(3)(c) of the same provision establishes that compensatory interest is due, "when the revision of the tax act at the initiative of the taxpayer is carried out more than one year after the request thereof, except where the delay is not attributable to the Tax Authority".
The situation under consideration is subject to article 43(3)(c) of the General Tax Law, since, being able to have questioned the assessment, the respondent chose to do nothing until the moment when a request for official review of the tax act was submitted.
As was written in the foundational judgment, between the date of assessment and the date of the review request, an extensive period elapsed during which the restoration of legality could have been provoked on the initiative of the taxpayer, which did not impel it, which justifies that the right to compensatory interest must have a more reduced scope as opposed to the situation in which the taxpayer raises the question of the illegality of the assessment act immediately after payment of the amount in question, as the legislator understood that the period of one year is the reasonable period for the Administration to decide on the review request and execute the respective decision, when favourable to the taxpayer, moving away from full indemnification of damages from the moment they arose in the patrimonial sphere of the taxpayer.
Hence it can be concluded that this provision of article 43(3)(c) of the LGT establishes a special regime, as regards compensatory interest, applicable only in situations of review, as is the case with the present proceedings, and not before the normal typical situation in which the challenge of the assessment is initiated after payment.
One cannot invoke article 57(1) of the LGT to solve the case at hand, as the obligation to conclude the proceedings within four months (and previously six months) would lead to the non-applicability of the one-year period set out in article 43(3)(c) of the LGT.
It is therefore understood that the compensatory interest to which the respondent is entitled, in this process, are only those due from one year after the review request submitted, that is, from 28-03-2017.
Article 43(3)(c) of the LGT establishes a special regime, as regards compensatory interest, applicable only in situations of revision of the tax act in which it is due one year after the review request.
(...)".
Agreeing with the expression of this Full Court judgment, whose grounds are hereby submitted, we are led to consider that the arbitral decision cannot be maintained in the measure of the interest determined, requiring its partial revocation. It should also be noted that this judgment follows case law drawn from some time ago, in particular the judgment of 22/06/2005 drawn in the appeal no. 322/05 where, with great clarity, it was stated:
(...) Article (3) further provides that "compensatory interest is also due in the following circumstances:
...
c) When the revision of the tax act at the initiative of the taxpayer is carried out more than one year after the request thereof, except where the delay is not attributable to the tax authority". And it is understood that it is so, since the taxpayer could, on the grounds of error attributable to the Services, question the assessment, in accordance with article 43(1) of the aforementioned article, having, in such a situation, if its claim succeeded, right to compensatory interest calculated in accordance with article 61(3) of the CPPT (from the date of payment of the undue tax until the date of issue of the respective credit note), if it let, possibly, the request to challenge pass and resorted to the mechanism of official review, it immediately became subject to the consequences of this legal mechanism.
For in requesting such revision it is reasonable that the AT has a certain period to consider it.
In this sense, reference can be made to Jorge de Sousa, CPPT Annotated, 4th edition, 2003, notes 2 and 10 when he states that in article 61 it is provided that compensatory interest shall be paid when revision of the tax act at the initiative of the taxpayer takes place more than one year after the request, if the delay is attributable to the Tax Authority, the start date for calculation of such compensatory interest, in the case of revision of the tax act at the initiative of the taxpayer (outside the situations of gracious complaint falling under article 43(1) of the same LGT), being due from one year after the submission of the review request, and may even be calculated from a later moment if the delay is not attributable to the Tax Authority.
And one does not find any unconstitutionality in such legal provision, in the interpretation left exposed, since the option for the review route which has this regime and not for the regime of article 43(1) is only attributable to the individual who chose that path and not this one, whereby no unconstitutionality occurs of article 43(3)(c) of the same LGT".
To argue that the application of the provision would be only for cases of success of the official review request would constitute a limitation on the extent of compensatory interest that has no verbal correspondence in the letter of the law and would function as "conditioning the decisive sense of the Administration" caustic it with more extensive interest in the case of dismissal of the review request presented well beyond the normal periods of challenge or complaint".
Indeed, corroborating the understanding endorsed by the Supreme Administrative Court in the learned judgment mentioned above, the Claimant is entitled to compensatory interest, which is only due from the end of one year after the submission of the review request submitted, that is, from 9 February 2019 until the date of processing of the respective credit note, in which they are included, in accordance with article 61(5) of the Code of Tax Procedure and Process.
VI – Decision
In these terms, the Arbitral Tribunal decides:
1. To dismiss the request for annulment of the IMI assessment acts nos. 2016..., 2016... and 2016..., relating to the year 2016, in the total amount of €32,972.99, as well as the dismissal of the request for official review submitted against them;
2. To order the Respondent to reimburse the Claimant in the amount referred to above in paragraph 1;
3. To order the Respondent to pay compensatory interest to the Claimant, from 9 February 2019 until the date of processing of the respective credit note, in which they are included.
VII – Value of the Proceedings
In accordance with the provisions of articles 306(2) of the Code of Civil Procedure and 97-A(1)(a) of the CPPT and article 3(2) of the Rules on Costs in Tax Arbitration Proceedings ("RCPAT"), the value of the proceedings is set at €32,972.99.
VIII – Costs
Pursuant to article 22(4) of the RJAT, the amount of costs is set at €1,836.00, in accordance with Table I attached to the RCPAT, to be borne by the Respondent.
Let it be notified.
Lisbon, 11 April 2019
The Arbitrator
(Ana Luísa Cabral Basto)
[1] Without prejudice to the amendments introduced by Law no. 114/2017, of 29 December – the content of which is not relevant or does not affect the interpretation of the normative content applicable to the case at hand.
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