Summary
Full Decision
ARBITRAL DECISION
They agree in Arbitral Court
I – Report
1. A... – Real Estate Investment Fund Management Company, S.A. (hereinafter referred to as the Claimant), with tax identification number ... and registered office at ..., ..., ... floor, ..., in Lisbon, manager of the Closed Real Estate Investment Fund B... (formerly designated as Closed Real Estate Investment Fund C...), filed a request for the constitution of an arbitral tribunal, pursuant to the provisions of articles 2, paragraph 1, subparagraph a), and 10 et seq. of Decree-Law No. 10/2011, of 20 January, to assess the legality of the tax assessment act for Municipal Tax on Onerous Property Transfers (IMT) No. ... of 30.07.2018, in the total amount of € 182,000.00, relating to the acquisition of a real estate property, requesting the annulment of that act, as it is subject to error regarding the factual and legal premises, and the consequent reimbursement of the improperly paid tax plus the respective compensatory interest.
The claim is grounded on the following terms:
The Closed Real Estate Investment Fund B... is a closed real estate investment fund whose activity is regulated by the General Regime of Collective Investment Undertakings, approved by Law No. 16/2015, of 24 February.
In the scope of its activity, the Claimant acquired for the Closed Real Estate Investment Fund B..., by deed of purchase and sale executed on 31 July 2018, full ownership of the urban property situated at ..., Union of the parishes of ... and ..., municipality of Sintra, described in the Property Registration Office of ... under No. ... of ... and registered in the respective urban property matrix under article P-...º.
The aforementioned property was acquired by the management company of the Closed Real Estate Investment Fund B... with the intention that it would form part of the assets of this fund.
This acquisition is exempt from IMT under article 1 of Decree-Law No. 1/87 of 3 January, with no tax payment being due for the acquisition of full ownership of the aforementioned property.
The Tax Authority did not submit a response
2. No request was made for the production of witness evidence and, following the procedure, the meeting referred to in article 18 of the RJAT was dispensed with, the case proceeding to submissions.
In submissions, the Claimant reproduced what was alleged in the initial petition, reiterating its previous position.
The Tax Authority did not submit counter-submissions.
3. The request for constitution of the arbitral tribunal was accepted by the President of CAAD and automatically notified to the Tax and Customs Authority in accordance with the applicable regulations.
Pursuant to the provisions of subparagraph a) of paragraph 2 of article 6 and subparagraph b) of paragraph 1 of article 11 of the RJAT, as amended by article 228 of Law No. 66-B/2012, of 31 December, the Deontological Council appointed as arbitrators of the collective arbitral tribunal the signatories hereof, who communicated their acceptance of the assignment within the applicable deadline.
The parties were duly and timely notified of such appointment and did not express any objection thereto, in accordance with the combined provisions of article 11, paragraph 1, subparagraphs a) and b), of the RJAT and articles 6 and 7 of the Deontological Code.
Thus, in conformity with the provision in subparagraph c) of paragraph 1 of article 11 of the RJAT, as amended by article 228 of Law No. 66-B/2012, of 31 December, the collective arbitral tribunal was constituted on 6 December 2018.
The arbitral tribunal was regularly constituted and is materially competent, as provided for in articles 2, paragraph 1, subparagraph a), and 30, paragraph 1, of Decree-Law No. 10/2011, of 20 January.
The parties possess legal personality and legal capacity, are legitimately parties to the case and are represented (articles 4 and 10, paragraph 2, of the same decree-law and 1 of Order No. 112-A/2011, of 22 March).
The process is not affected by nullities and no exceptions were raised.
It is for us to assess and decide.
II – Reasoning
Factual Matters
4. The factual matters relevant to the decision of the case are as follows:
a) On 8 August 2018, the Closed Real Estate Investment Fund C... changed its designation to Closed Real Estate Investment Fund B...;
b) The Closed Real Estate Investment Fund B..., managed by the Claimant, is a real estate investment fund whose activity is regulated by the General Regime of Collective Investment Undertakings, approved by Law No. 16/2015, of 24 February.
c) In the exercise of its activity, the Claimant acquired, by deed of 31 July 2018, on behalf of the currently designated Closed Real Estate Investment Fund B..., and to form part of its assets, the urban property situated at ..., Union of the parishes of ... and ..., municipality of Sintra, described in the Property Registration Office of ... under No. ... of ... and registered in the respective urban property matrix under article P-...º (Doc. 2 attached to the arbitral request).
d) On 30 July 2018, an IMT assessment notice No. ... was issued and paid on the following day, 31 July, relating to the acquisition of the property, in the amount of € 182,000.00 (Docs. 1 and 3 attached to the arbitral request).
e) The voluntary payment deadline was 31 July 2018 (Doc. 1 attached to the arbitral request).
f) The present request was filed on 25.09.2018.
Legal Issue
5. The Claimant contends that the acquisition of the real estate property effected for the Real Estate Investment Fund under its management is covered by the IMT exemption, originally provided for in article 1 of Decree-Law No. 1/87, of 3 January, as an exemption from transfer tax, and which was preserved by article 28, paragraph 2, of Decree-Law No. 287/2003, of 12 November, and maintained in force by article 31, paragraph 6, of that decree-law.
The issue that arises is, therefore, whether subsequent legislative developments have terminated the effectiveness of the aforementioned provision of article 1 of Decree-Law No. 1/87.
On this matter, an arbitral decision has already been issued in Case No. 622/2018-T – in line with what was also decided in Cases Nos. 478/2018-T, 474/2018-T, 326/2018-T and 544/2016-T – and which, for lack of need for any other considerations, is now reproduced:
"Decree-Law No. 1/87 provides, in its article 1, that 'acquisitions of real estate property effected for a real estate investment fund by its respective management company are exempt from transfer tax'. This provision arises as a consequence of the regulation of real estate investment funds, carried out by Decree-Law No. 246/85, of 12 July, and, as emerges from its respective preamble, was intended to define an appropriate fiscal framework for the creation of such funds to which the Government recognizes an important contribution to savings formation and mobilization of investments in the real estate sector, with positive effects on construction and the real estate rental market.
Meanwhile, Decree-Law No. 287/2003, of 12 November, which carried out the reform of property taxation, approving in annex the Code of Municipal Property Tax (CIMI) and the Code of Municipal Tax on Onerous Property Transfers (CIMT), determined, in article 28, paragraph 2, that references contained in legal texts to municipal transfer tax should be considered as referring to the Code of Municipal Tax on Onerous Property Transfers.
Furthermore, the same decree-law, in article 31 – which included various repealing provisions – preserved, in its paragraph 6, the maintenance in force of tax benefits relating to municipal transfer tax established in separate legislation.
Thus, in accordance with the combined interpretation of the cited provisions of articles 28 and 31, paragraph 6, of Decree-Law No. 287/2003, the exemptions from transfer tax contained in any separate decrees should be considered as applying to the IMT, and, on the other hand, the acquisitions of real estate property effected for a real estate investment fund would continue to be exempt from IMT by virtue of the provision established in article 1 of Decree-Law No. 1/87.
Following the creation of the exemption from transfer tax regarding the acquisition of real estate property for real estate investment funds, in 1987, Decree-Law No. 215/89, of 1 July, came to approve the Tax Benefits Statute, with the clear purpose of systematizing the general principles to which the attribution of benefit situations must comply. The Tax Benefits Statute arose as a consequence of the reform of income tax on individuals (CIRS), income tax on legal entities (CIRC) and municipal contribution (CA), which had already introduced some structural tax relief mechanisms, so the Statute aimed to characterize some other situations of lesser structural character but with relative stability, leaving for future State Budget laws the benefits with markedly cyclical purposes or requiring more frequent regulation (cf. the respective preamble note).
In the original version of the Tax Benefits Statute, and regarding real estate management and investment companies, only a specific tax regime for taxation purposes of corporate income tax was contemplated and, under personal income tax, as regards profits distributed by such companies to their respective members (article 26). This regime was maintained with various amendments and came to be transferred to article 22 with Law No. 109-B/2001, of 27 December, under the heading "Investment Funds", which was also subject to various legislative amendments.
It is the new wording given to article 46 of the Tax Benefits Statute by the State Budget Law for 2003 (Law No. 32-B/2002, of 30 December) that provides, for the first time, a tax exemption regime in favor of real estate investment funds regarding municipal contribution, in the following terms:
Properties integrated into real estate investment funds and equivalent, pension funds and retirement savings funds, which are established and operated in accordance with national legislation, are exempt from municipal contribution.
Following the reform of property taxation, approved by the aforementioned Decree-Law No. 287/2003 – which repealed the Code of Municipal Contribution – this article 46, in the wording given by the State Budget Law for 2007 (Law 53-A/2006, of 29 December), came to establish the exemption from municipal property tax (IMI) and municipal tax on onerous property transfers (IMT) for properties integrated into real estate investment funds, under the same conditions that already appeared in the previous wording of the provision, and Decree-Law No. 108/2008, of 26 June, maintained this same exemption in the same terms.
Law No. 3-B/2010, of 28 April, being also a budget law, through new wording given to article 49 of the Tax Benefits Statute, came to exempt from municipal property tax and municipal tax on onerous property transfers only "properties integrated into open real estate investment funds", and the State Budget Law for 2012 (Law No. 55-A/2010, of 31 December) extended this exemption to "properties integrated into open or closed real estate investment funds of public subscription".
Law No. 83-C/2013, of 31 December, amending that article 49, abolished the exemption, coming instead to provide for the reduction by half of the rates of municipal property tax and municipal tax on onerous property transfers applicable to properties integrated into open or closed real estate investment funds of public subscription.
Article 49 of the Tax Benefits Statute was repealed by article 215, paragraph 1, subparagraph g), of Law No. 7-A/2016, of 30 March.
6. From the legislative evolution just described, the idea stands out that the tax benefits attributed to real estate investment funds do not have a systematic character, taking on instead a markedly cyclical nature, which justifies why successive amendments to the legal regime have been established, as a rule, by way of budget laws.
It suffices to note that it started by providing for the exemption of municipal contribution – and of IMI and IMT – regarding properties integrated into any type of real estate fund, to then restrict that exemption to properties integrated into open real estate investment funds. Later, the exemption was restored regarding properties integrated into open or closed real estate investment funds of public subscription until the tax benefit was transformed into a reduction of the tax rate applicable and, finally, was abolished.
It is not possible to see, therefore, in the approval of the Tax Benefits Statute and in the multiple amendments to that Statute a general criterion that allows for the definition of a stable fiscal regime that could override other separate provisions that already subsisted in the legal order.
Moreover, it is important to note that the scope of application of the exemption initially created by Law No. 53-A/2006, through the amendment of article 46 of the Tax Benefits Statute – which came to provide for the exemption of IMI and IMT regarding properties integrated into real estate investment funds – is not coincident with that of the exemption contemplated in article 1 of Decree-Law No. 1/87, which refers to acquisitions of real estate property effected for a real estate investment fund by its respective management company. In fact, as a result of the new provision of article 46 of the Tax Benefits Statute, properties already integrated into real estate investment funds became exempt from IMT, whereas the exemption referred to in the 1987 decree-law covered acquisitions of real estate property effected by management companies of real estate investment funds to become part of the assets of such funds. This means that the Tax Benefits Statute came to broaden the exemption, covering not only situations in which the fund is in the position of acquirer of the property, but also those in which the fund acts in the position of alienator of the property (cf. in this sense, the arbitral award issued in Case No. 544/2016, in which the same issue was analyzed).
7. It now falls to us to address the question of whether the provision of article 1 of Decree-Law No. 1/87 is repealed by any of the provisions of the Tax Benefits Statute that came to regulate the IMT exemption regarding real estate investment funds or whether there has been a repeal by the system as a result of the new overall regulation of the matter of tax benefits.
As emerges from article 7, paragraph 2, of the Civil Code, the repeal of a law "may result from express declaration, from incompatibility between the new provisions and the preceding rules or from the fact that the new law regulates all matters of the prior law".
Repeal is express when a law identifies, in an explicit declaration, the object of the cessation of effectiveness of a prior law. Tacit repeal takes place when, faced with the legislator's silence on the identification of repealed provisions, a content incompatibility is registered between the provisions of a new law and those of a chronologically preceding legislative act. Global repeal occurs when a normative complex comes to be, in its entirety, subject to a different discipline from that which previously applied, regardless of the problem of its compatibility with the rules previously in force (cf. BAPTISTA MACHADO, Introduction to Law and to Legitimizing Discourse, Coimbra, 1993, pp. 165-166; CARLOS BLANCO MORAIS, Reinforced Laws – Reinforced Laws of Procedure Within the Framework of the Structuring Criteria of Relations Between Legislative Acts, Coimbra, 1998, pp. 338, 341 and 343).
Express repeal does not raise special difficulties. It consists of a declaration made in the new law and may be limited to extinguishing the effectiveness of the old law or to resuming a prior legal regime that had been repealed by it, or be accompanied by constitutive or modificatory effects, as occurs when the repealing law institutes a new normative complex or operates the amendment of the prior legal regime.
Tacit repeal is verified to the extent of the contradiction existing between the preceding law and the new law, because where such contradiction does not exist, coexistence or interpenetration between the two laws is possible.
Global repeal has in common with tacit repeal the fact that it operates in the possible silence of the legislator, who may say nothing about the suppression of preceding laws, but differs from it by the fact that it does not necessarily register a general incompatibility of commands between the old law and the new law. The rationale for this type of repeal is anchored essentially in reasons associated with the updating of the legal innovation process or with policies of systematization and legislative consolidation (CARLOS BLANCO MORAIS, op. cit., p. 344).
8. Applying the principles just stated to the situation sub judice, it is readily concluded that the provision of article 1 of Decree-Law No. 1/87 cannot be considered repealed.
It is established that the provision of article 1 of Decree-Law No. 1/87 was not subject to express repeal. And, as has been implied, there is no incompatibility between that provision and the one that came to be introduced in the Tax Benefits Statute (article 46, later renumbered as article 49), since these provisions contain different scopes of application and the latter merely expanded the exemption already established by the 1987 decree-law.
The possibility of a repeal by the system is also ruled out. As has been set out, the Tax Benefits Statute, in its original version, and regarding real estate management and investment companies, only established a specific tax regime concerning corporate income tax and personal income tax. And only much later, through budget laws, was it established regarding real estate investment funds, through the new wording given to article 46 (later renumbered as article 49), the exemption concerning taxation of assets by reference to municipal contribution and, subsequently, to IMI and IMT (Laws No. 32-B/2002, of 30 December, and 53-A/2006, of 29 December). This regime underwent further successive amendments until the tax benefit came to translate into the reduction by half of the tax rates on real estate and on onerous property transfers (Law No. 83-C/2013, of 31 December) and was finally abolished by the repeal of article 49 carried out by Law No. 7-A/2016, of 30 March.
With the approval of the Tax Benefits Statute, tax benefits of a structural character applicable to the financial system and capital markets, including here investment funds, focused on the taxation of income. The subsequent introduction of an IMI and IMT exemption applicable to investment funds, in the category of tax benefits relating to real estate, through merely amending an already existing provision, does not evidence any general criterion defining the regime of tax benefits concerning taxation of property and the subsequent legislative evolution reveals that the exemption was instituted for merely cyclical reasons and without a clear purpose of systematizing the legal regime.
In this context, one cannot speak of a global repeal of article 1 of Decree-Law No. 1/87."
All these considerations remain fully valid and are applicable to the situation of the concrete case, leading to the conclusion that the tax assessment act for IMT relating to the acquisition of the real estate property by the Claimant as representative of the Real Estate Investment Fund is illegal by violation of the provision of the aforementioned article 1 of Decree-Law No. 1/87, of 3 January.
Compensatory Interest
The Claimant further requests the condemnation of the Tax Authority to pay compensatory interest, at the legal rate, calculated on the tax, until full reimbursement of the amount owed.
In accordance with the provision in subparagraph b) of article 24 of the RJAT, the arbitral decision on the merits of the claim against which there is no recourse or challenge binds the Tax Administration in the exact terms of the success of the arbitral decision in favor of the taxpayer, whereupon it is incumbent upon it to "restore the situation that would exist if the tax assessment act that is the subject of the arbitral decision had not been carried out, adopting the acts and operations necessary for this purpose". This is in line with the provision in article 100 of the General Tax Law, applicable by virtue of the provision in subparagraph a) of paragraph 1 of article 29 of the RJAT.
Furthermore, pursuant to paragraph 5 of article 24 of the RJAT, "payment of interest is due, regardless of its nature, as provided for in the General Tax Law and in the Tax Procedure and Process Code", which refers to the provision in articles 43, paragraph 1, of the General Tax Law and 61, paragraph 5, of the Tax Procedure and Process Code, implying payment of compensatory interest from the date of improper payment of the tax until the date of processing of the respective credit note.
There is therefore place, following the declaration of illegality of the IMT assessment act, to payment of compensatory interest, in accordance with the cited provisions of articles 43, paragraph 1, of the General Tax Law and 61, paragraph 5, of the Tax Procedure and Process Code, calculated on the amount that the Claimant improperly paid, at the rate of legal interest (articles 35, paragraph 10, and 43, paragraph 4, of the General Tax Law).
III – Decision
We decide as follows:
a) To judge the arbitral pronouncement request well-founded and to annul the tax assessment act for municipal tax on onerous property transfers No. ...;
b) To condemn [the Tax Authority] to reimburse the amount of € 180,000.00 and to payment of compensatory interest from the payment of the tax until the date of issuance of the credit note, in accordance with articles 43 of the General Tax Law and 61 of the Tax Procedure and Process Code.
Value of the Case
The Claimant indicated as the value of the case the amount of € 180,000.00, which was not contested by the Respondent, and corresponds to the value of the assessment against which it was sought to object (article 97, paragraph 1, subparagraph a), of the Tax Procedure and Process Code).
Costs
Pursuant to articles 12, paragraph 2, and 24, paragraph 4, of the RJAT, and 3, paragraph 2, of the Regulation of Costs in Tax Arbitration Proceedings and Table I attached to that Regulation, the amount of costs is fixed at € 3,672.00, which is charged to the Respondent.
Notify.
Lisbon, 16 April 2019
The President of the Arbitral Tribunal,
José Poças Falcão
The Arbitrator Member,
Cristina Aragão Seia
The Arbitrator Member,
António Pragal Colaço
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