Process: 49/2017-T

Date: May 16, 2017

Tax Type: IMT Selo

Source: Original CAAD Decision

Summary

This CAAD arbitral decision addresses the tax consequences when a Real Estate Investment Fund for Residential Rental (FIIAH) disposes of a property that originally benefited from IMT and Stamp Duty exemptions. The claimant company acquired an urban property in December 2013 under the FIIAH regime with full IMT and IS exemptions, intending to lease it for permanent residential purposes. When the property was sold in November 2016 instead of being rented, the Tax Authority assessed IMT of €2,956.34 and IS of €1,227.60, based on the loss of exemption due to non-compliance with the permanent rental requirement. The company challenged these assessments before CAAD under the Legal Framework for Arbitration in Tax Matters (RJAT). The case centers on the interpretation of Law 83-C/2013 (2014 State Budget), which introduced paragraphs 14-16 to Article 8 of the FIIAH regime, establishing that properties must be leased within three years to maintain exemptions, and that disposal before this period triggers tax assessment. A critical issue is the transitional regime under Article 236, which applies retroactively to properties acquired before January 1, 2014, counting the three-year compliance period from that date. The tribunal confirmed its material competence under Article 2(1)(a) of RJAT to review IMT and IS assessments, establishing important precedent for FIIAH fund managers navigating tax exemption requirements and compliance obligations.

Full Decision

ARBITRAL DECISION

I. REPORT

A…, S.A., with registered office at …, no. … – …, … – … Lisbon, with share capital of €1,550,000.00, registered with the Commercial Registry Office of Lisbon under the single registration and tax identification number …, filed a petition for the constitution of a single Arbitral Tribunal, pursuant to the combined provisions of Articles 2 and 10 of Decree-Law no. 10/2011 of 20 January (Legal Framework for Arbitration in Tax Matters, hereinafter referred to as RJAT), in which the Tax and Customs Authority (hereinafter AT) is the respondent, with the objective of obtaining a declaration of illegality of the assessment act for Transfer Tax (IMT) no. … and Stamp Duty (IS) no. …, in the total amount of €4,183.94.

The petition for constitution of the Arbitral Tribunal was accepted by the Esteemed President of CAAD on 20 January 2017 and automatically notified to AT.

In accordance with the provision laid down in paragraph (c) of Article 11(1) of RJAT, the single Arbitral Tribunal was constituted on 21 March 2017.

AT responded, arguing for the dismissal of the arbitral proceedings in the event of a finding of tribunal incompetence or, in the alternative, that the claim should be found to be unfounded.

The meeting referred to in Article 18 of RJAT was dispensed with, given the nature of the matter contained in the case file, and the parties were notified to submit written submissions.

The Arbitral Tribunal is regularly constituted and is materially competent, pursuant to paragraph (a) of Article 2(1) of RJAT.

The parties have legal personality and capacity, are legitimately before the tribunal and are represented (Article 4 and Article 10(2) of RJAT and Article 1 of Ordinance no. 112/2011 of 22 March).

The proceedings are free from nullities, and the exception raised by the respondent will be considered as a priority.

II. STATEMENT OF FACTS

Based on the evidence contained in the case file, the following facts are established:

A) On 18 December 2013, the claimant acquired the property entered in the urban property register of the parish of … and … under article U-…, …;

B) Said property was acquired by the claimant exclusively for lease for permanent residential purposes;

C) The property in question benefited from exemption from Transfer Tax and Stamp Duty upon acquisition by the claimant under Article 8(7)(a) and Article 8(8) of the legal framework governing Real Estate Investment Funds for Residential Rental (FIIAH);

D) On 3 November 2016, the claimant requested the assessment of Transfer Tax and Stamp Duty on the property in question, in the amounts of €2,956.34 and €1,227.60, respectively;

E) The assessments at issue were based on the fact that the property was put to a use different from lease for permanent residential purposes, namely its disposal;

F) The assessments in question were paid by the claimant on 3 November 2016.

Taking into account the positions assumed by the parties, in light of Article 110(7) of the Code of Tax Procedure and Process, and the documentary evidence attached to the case file, the above-listed facts are established as relevant to this decision.

III. LEGAL ISSUES

A – THE PARTIES' POSITIONS

The claimant argues in its petition for arbitral decision as follows:

  • Law no. 64-A/2008 of 31 December (State Budget for 2009) approved the special regime applicable to real estate investment funds for residential rental (hereinafter "FIIAH") and real estate investment companies for residential rental;

  • Its Article 8 (Tax regime) established the tax regime applicable to FIIAH (hereinafter this regime will be briefly referred to as the "FIIAH Tax Regime");

  • With regard to the Municipal Transfer Tax on Real Estate (hereinafter "IMT"), the FIIAH Tax Regime defined the following in Article 8(7) (Tax regime):

"7 — The following are exempt from IMT:

a) The acquisition of urban properties or autonomous fractions of urban properties intended exclusively for lease for permanent residential purposes by the investment funds referred to in Article (1);

b) The acquisition of urban properties or autonomous fractions of urban properties intended for permanent own residential use resulting from the exercise of the purchase option referred to in Article 5(3) by lessees of properties that form part of the assets of the investment funds referred to in Article (1)."

  • Law no. 83-C/2013 of 31 December (State Budget for 2014) added to Article 8 (Tax regime) of the FIIAH Tax Regime paragraphs 14 to 16, with the following text:

"14 - For the purposes of Articles 6 to 8, urban properties are considered to be intended for lease for permanent residential purposes whenever they are subject to a lease contract for permanent residential purposes within a period of three years from the moment they become part of the fund's assets, with the taxpayer required to notify and provide proof to AT of the respective actual lease within 30 days following the end of said period.

15 - When properties have not been the subject of a lease contract within the three-year period provided in the preceding paragraph, the exemptions provided in Articles 6 to 8 shall cease to have effect, and in that case the taxpayer must request AT, within 30 days following the end of said period, to assess the respective tax.

16 - If properties are disposed of, except in the cases provided for in Article 5, or if the FIIAH is subject to liquidation, before the period provided for in Article 14 has elapsed, the taxpayer must also request AT, before the disposal of the property or the liquidation of the FIIAH, to assess the tax due under the preceding paragraph."

  • Law no. 83-C/2013 of 31 December (State Budget for 2014) also established in its Article 236 (Transitional provision within the special regime applicable to FIIAH and SIIAH) the following transitional regime:

"1 - Articles 8(14) to 8(16) of the special regime applicable to FIIAH and SIIAH, approved by Articles 102 to 104 of Law no. 64-A/2008 of 31 December, shall apply to properties acquired by FIIAH from 1 January 2014 onwards.

2 - Without prejudice to the provision of the preceding paragraph, Articles 8(14) to 8(16) of the special regime applicable to FIIAH and SIIAH, approved by Articles 102 to 104 of Law no. 64-A/2008 of 31 December, shall equally apply to properties acquired by FIIAH before 1 January 2014, with the three-year period provided for in Article 14 being counted from 1 January 2014 in such cases."

  • Based on the provisions cited above, in particular those resulting from the amendments made to the FIIAH Tax Regime, the claimant requested AT to assess Transfer Tax and Stamp Duty (hereinafter "IS") on the tax events relating to the disposal of properties by Fund B… already identified;

  • The amendments introduced by Law no. 83-C/2013 of 31 December (State Budget for 2014) to the FIIAH Tax Regime raised legitimate questions and uncertainties for the management companies of FIIAH seeking to fulfill their obligations before the Tax Authority;

  • Without exhausting the issues raised, it is contended that the amendments to the FIIAH Tax Regime are of particular relevance in the context of taxes with a single obligation, namely IMT and IS when they concern properties that formed part of the assets of FIIAH at the date of entry into force of Law no. 83-C/2013 of 31 December (State Budget for 2014), that is, those covered by the aforementioned Article 236 (Transitional provision within the special regime applicable to FIIAH and SIIAH);

  • The claimant, as indicated above, requested AT to assess Transfer Tax and Stamp Duty on the tax events in light of the amendments introduced to the FIIAH Tax Regime;

  • Those tax events concerned an urban property that formed part of the assets of Fund B… at the date of entry into force of Law no. 83-C/2013 of 31 December (State Budget for 2014), that is, those covered by the aforementioned Article 236 (Transitional provision within the special regime applicable to FIIAH and SIIAH);

  • The claimant contends that the assessments are illegal due to violation of Article 103 (Tax system), paragraph 3, of the Constitution of the Portuguese Republic and should, consequently, be declared null;

  • Indeed, the taxable event is, both under IMT and under IS, the acquisition of ownership of the relevant properties by Fund B…, and the exemptions from IMT and IS were not, at the time they entered the assets of Fund B…, conditional upon the subsequent occurrence of any facts or circumstances, nor were they subject to any regime of lapse;

  • Since no facts or circumstances that would condition the lapse of the granted exemption were legally foreseen at the moment of recognition of the exemption, it is manifest that the subsequent imposition of such facts or circumstances on exemptions crystallized in the claimant's tax law order is unconstitutional due to violation of the principle of non-retroactivity of tax law, enshrined in Article 103 (Tax system), paragraph 3, of the Constitution of the Portuguese Republic;

  • Considering that the principle of non-retroactivity of tax law constitutes a fundamental right, endowed with the protective legal regime of this right, its violation results in the nullity of the act, in this case, the nullity of the Assessments;

  • In the alternative, if the defect (illegality) of the Assessments is deemed to result in their annulability (rather than nullity), the Assessments should be annulled accordingly, pursuant to Article 10(1)(a) of RJAT and Article 102(1)(a) of the Code of Tax Procedure and Process.

For its part, AT argues, in summary, as follows:

  • The Arbitral Tribunal does not have competence to assess or declare the constitutionality or unconstitutionality of Article 236 of Law 83-C/2013 of 31 December in the abstract, as the claimant essentially seeks;

  • Competence for abstract review of legality and constitutionality is reserved to the Constitutional Court as established in Article 281 of the Constitution of the Portuguese Republic;

  • The respondent contends that the Arbitral Tribunal is incompetent to perform abstract review of either the legality or constitutionality of Article 236 of Law 83-C/2013 of 31 December, and therefore the objection of lack of material jurisdiction is met.

  • Since a normative act emanating from the Assembly of the Republic in the typical form of a legislative act is at issue, the Tribunal should declare the dismissal of the respondent from the proceedings, given the objection of lack of passive legitimacy raised, pursuant to Articles 278(1)(d) and 576(1) and (2) of the Code of Civil Procedure, applicable by virtue of Article 29(1)(e) of RJAT.

  • Even if this were not the case, which the respondent admits for the sake of academic hypothesis, the respondent contends that, at the time of creation of the tax regime applicable to FIIAH, the exemptions from IMT and IS required, respectively: (i) that the acquisition of the properties be intended exclusively for "lease for permanent residential purposes" and (ii) that the transfer concern "properties intended for permanent residential use arising from the conversion of the right of property in such properties into a right of lease thereon, as well as through the exercise of the purchase option provided for in Article 5(3)."

  • In the present case, the property was not put to the use provided for by law, that is, lease.

  • The respondent contends that Article 236 of Law 83-C/2013 of 31 December, which approved the state budget for 2014, introduced a new regime of lapse of the exemptions provided for in Article 8(7)(a) and Article 8(8) of the Tax Regime of the Closed Real Estate Investment Fund for Residential Rental (FIIAH) and not merely a clarification of the criteria previously provided for by law.

  • And, following this understanding, which in our view is incorrect, the claimant considers that there is a violation of the principle of non-retroactivity of tax law as constitutionally established. Let us examine this.

  • The FIIAH was introduced by Law no. 64-A/2008 of 31 December (Law which approved the Budget for 2009) with the objective of supporting people facing difficulty in paying monthly installments on home purchase loans.

  • Under this regime, owners sell their property to the FIIAH and conclude with it a lease contract with an option to purchase the property, that is, owners sell and lease the property with a right of repurchase.

  • "In conclusion, the present regime aims to achieve two fundamental objectives: the first, to address situations of hardship, and the second, to encourage leasing for own permanent residential purposes." In Real Estate Investment Funds for Residential Rental, Amândio Fernandes Silva, Jornal de Negócios of 19.01.2009.

  • The new law does not alter the prerequisites, conditions for granting and recognition of the tax benefit of exemption from IMT and IS, providing only for the legal specification of the time and manner of fulfillment of a requirement previously established by law.

  • Therefore, no situation of retroactivity of tax law is verified in the present case, but even if this were not the case, the Constitutional Court has held in Decisions nos. 11/83, 66/84 and 141/85 that, although a radical prohibition of retroactive taxes cannot be derived from the Constitution, it should be considered constitutionally barred when such retroactivity is "arbitrary and oppressive and violates "in an intolerable manner the legal certainty and the confidence that persons have the obligation (and also the right) to place in the legal order that governs them."

  • All things considered, it is manifest that, from the outset of the regime, the tax benefits at issue applicable to FIIAH have always depended on the dedication of properties to lease for permanent residential purposes.

B - THE EXCEPTIONS RAISED

In the response presented, AT defends itself by raising an exception which, if proven, leads to dismissal of the proceedings.

AT argues in this regard that the Tribunal is incompetent to perform an abstract review of the constitutionality of Article 236 of Law no. 83-C/2013 of 31 December, and the respondent is therefore without passive standing in this matter.

However, the claimant does not ask this Tribunal to perform an abstract review of the constitutionality of the norm in question, but rather a concrete successive review of its constitutionality.

Since, pursuant to Article 25 of RJAT, this Tribunal has competence to perform concrete successive review of the constitutionality of Article 236 of Law no. 83-C/2013 of 31 December, the exceptions raised are found to be without merit.

C – THE CLAIM

Given the foregoing, concerning the positions of the parties and the arguments presented, to determine whether the assessment acts for IMT and IS under consideration are or are not illegal due to violation of Article 103(3) of the Constitution of the Portuguese Republic, it will be necessary to ascertain what interpretation should be given to Article 236 of Law no. 83-C/2013 of 31 December.

For this purpose, it is important to heed Article 11 of the General Tax Law (LGT), according to which the interpretation of tax law should be carried out in accordance with general principles of interpretation.

The general principles of interpretation are established in Article 9 of the Civil Code (CC), in the following terms:

"1. The interpretation should not be limited to the letter of the law, but should reconstruct from the texts the legislative intent, taking particularly into account the unity of the legal system, the circumstances in which the law was drafted, and the specific conditions of the time in which it is applied.

  1. However, the interpreter cannot consider legislative intent that does not have in the letter of the law a minimum of verbal correspondence, even if imperfectly expressed.

  2. In determining the meaning and scope of the law, the interpreter shall presume that the legislator adopted the most correct solutions and was able to express its intent in adequate terms."

In accordance with those principles, let us now examine what the tax regime was applicable to the acquisition of urban properties or autonomous fractions of urban properties intended exclusively for lease for permanent residential purposes by FIIAH and SIIAH, before the amendments provided for by Article 236 of the 2014 State Budget Law were introduced.

Thus, Article 8 of the legal framework governing FIIAH and SIIAH provided as follows:

"Article 8

Tax regime

1 - Income of any nature obtained by FIIAH established between 1 January 2009 and 31 December 2013, which operate in accordance with national legislation and in compliance with the conditions provided for in the preceding articles, is exempt from Corporate Income Tax (IRC).

2 - Income relating to units of participation in the investment funds referred to in the preceding paragraph, paid or made available to their respective holders, whether by distribution or reimbursement, is exempt from Personal Income Tax (IRS) and Corporate Income Tax (IRC), excluding the net balance between capital gains and losses resulting from the disposal of participation units.

3 - Capital gains resulting from the transfer of properties intended for personal residential use to the investment funds referred to in paragraph 1, arising from the conversion of the right of property in such properties into a right of lease, are exempt from IRS.

4 - The capital gains referred to in the preceding paragraph become taxable under the general rules if the taxpayer ceases the lease contract or does not exercise the purchase option right provided for in Article 5(3), with the limitation periods and prescription periods for the purposes of assessment and collection of IRS being suspended until the end of the contractual relationship.

5 - The amounts borne by lessees of properties of the investment funds referred to in paragraph 1 resulting from the conversion of a right of property in a property into a right of lease are deductible from tax liability, under the terms and limits contained in Article 85(1)(c) of the IRS Code.

6 - Urban properties intended for lease for permanent residential purposes that form part of the assets of the investment funds referred to in paragraph 1 are exempt from Municipal Property Tax (IMI), as long as they remain in the portfolio of the FIIAH.

7 - The following are exempt from Transfer Tax (IMT):

a) The acquisition of urban properties or autonomous fractions of urban properties intended exclusively for lease for permanent residential purposes by the investment funds referred to in paragraph 1;

b) The acquisition of urban properties or autonomous fractions of urban properties intended for permanent own residential use resulting from the exercise of the purchase option referred to in Article 5(3) by lessees of properties that form part of the assets of the investment funds referred to in paragraph 1.

8 - Stamp Duty is exempt on all acts undertaken, provided they are connected with the transfer of urban properties intended for permanent residential use arising from the conversion of the right of property in such properties into a right of lease thereon, as well as with the exercise of the purchase option provided for in Article 5(3).

9 - Management entities of FIIAH are exempt from supervision fees as regards exclusively the management of funds of this nature.

10 - Entities that are residents of a country, territory or region subject to a clearly more favorable tax regime, as listed in a list approved by an ordinance of the Minister of Finance, are excluded from the exemptions provided for in this article.

11 - The obligations provided for in Article 119 and Article 125(1) of the IRS Code must be fulfilled by the managing or registering entities.

12 - If the requirements referred to in paragraph 1 cease to be fulfilled, the application of the regime provided for in this article ceases, and the regime provided for in Article 22 of the Tax Benefits Statute becomes applicable, with the income of the investment funds referred to in paragraph 1 which have not yet been paid or made available to their respective holders at that date being taxed autonomously at the rates provided for in Article 22 of the same act, with the corresponding compensatory interest being added.

13 - The management entities of the investment funds referred to in paragraph 1 are jointly and severally liable for the tax debts of the funds whose management is their responsibility."

From what is described above, it results, with relevance to the assessment of the assessment acts under consideration, that "The acquisition of urban properties or autonomous fractions of urban properties intended exclusively for lease for permanent residential purposes by the investment funds referred to in paragraph 1" are exempt from IMT and IS.

Thus, the exemption from IMT and IS covers i) the acquisition of urban properties or autonomous fractions of urban properties, ii) the intended purpose of which is exclusively lease for permanent residential purposes, iii) carried out by eligible FIIAH.

Thus, if there had been no legislative amendment to Article 8, the exemptions from IMT and IS in question would be maintained only as long as the legal conditions for their application referred to in the preceding paragraph continued to be met.

It is therefore incomprehensible to argue that the exemptions from IMT and IS at issue were not at that time conditional upon the subsequent occurrence of any facts or circumstances, nor were they subject to any regime of lapse.

However, the exemption itself is conditional upon the facts and circumstances for which it is granted and which result from its statutory provision and regulation.

Now, given that the established facts show that the assessment acts in question concern a property that was disposed of, it is verified that in light of the legal framework governing FIIAH established from the outset, the exemption from IMT and IS lapsed, since the intended purpose of the property ceased to be exclusively lease for permanent residential purposes.

Taking into account that the assessment acts for IMT and IS now in question are based on the law as set out in Articles 34(1) and (2) of the IMT Code and Articles 8(7) and (8) of the FIIAH Tax Regime, as drafted at the time of the property's acquisition by the Fund, the assessment acts in question are legal, since the exemption granted lapsed upon the disposal of the property, given the change in the property's intended purpose, which is a prerequisite of the tax benefit granted.

The issue raised by the claimant regarding the retroactivity or non-retroactivity of the norms introduced by Article 236 of Law no. 83-C/2013 of 31 December is therefore absolutely irrelevant to assessing the legality of the assessment acts under consideration in this specific case.

In fact, the 2014 State Budget Law added to Article 8 paragraphs 14 to 16, in the following terms:

"14 - For the purposes of Articles 6 to 8, urban properties are considered to be intended for lease for permanent residential purposes whenever they are the subject of a lease contract for permanent residential purposes within a period of three years from the moment they become part of the fund's assets, with the taxpayer required to notify and provide proof to AT of the actual lease within 30 days following the end of said period.

15 - When properties have not been the subject of a lease contract within the three-year period provided in the preceding paragraph, the exemptions provided in Articles 6 to 8 shall cease to have effect, and in that case the taxpayer must request AT, within 30 days following the end of said period, to assess the respective tax.

16 - If properties are disposed of, except in the cases provided for in Article 5, or if the FIIAH is subject to liquidation, before the period provided for in Article 14 has elapsed, the taxpayer must also request AT, before the disposal of the property or the liquidation of the FIIAH, to assess the tax due under the preceding paragraph."

In the situation under consideration, none of the situations specifically provided for in the transcribed norms is at issue (or at least, no facts were alleged to that effect).

The norm questioned by the claimant establishes the following:

"Article 236

Transitional provision within the special regime applicable to FIIAH and SIIAH

1 - Articles 8(14) to 8(16) of the special regime applicable to FIIAH and SIIAH, approved by Articles 102 to 104 of Law no. 64-A/2008 of 31 December, shall apply to properties acquired by FIIAH from 1 January 2014 onwards.

2 - Without prejudice to the provision of the preceding paragraph, Articles 8(14) to 8(16) of the special regime applicable to FIIAH and SIIAH, approved by Articles 102 to 104 of Law no. 64-A/2008 of 31 December, shall equally apply to properties acquired by FIIAH before 1 January 2014, with the three-year period provided for in Article 14 being counted from 1 January 2014 in such cases."

Since the said transitional provision refers to Articles 8(14) to 8(16), whose provision is inapplicable to the present situation, the discussion of the retroactivity of the norm in question has no place in the present case.

IV. DECISION

Whereupon this Arbitral Tribunal decides:

A) To find the exception of lack of jurisdiction and passive illegitimacy raised by the respondent to be entirely without merit;

B) To find the claim for nullity and annulment of the identified assessment acts for IMT and IS to be entirely without merit;

C) To condemn the claimant to bear the costs of these proceedings as the unsuccessful party.

V. VALUE OF THE PROCEEDINGS

In accordance with Article 306(2) of the Code of Civil Procedure, Article 97-A(1)(a) of the Code of Tax Procedure and Process, and Article 3(2) of the Regulations on Costs in Tax Arbitration Proceedings, the value of the claim is fixed at €4,183.94.

VI. COSTS

Pursuant to Articles 12(2) and 22(4) of RJAT, and Article 4(4) of the Regulations on Costs in Tax Arbitration Proceedings, the arbitration fee is set at €612 in accordance with Table I of the said Regulations, to be borne by the claimant.

Let notice be given.

Lisbon, 16 May 2017

The Arbitrator

Magda Feliciano

(This decision was drafted by computer in accordance with Article 131(5) of the Code of Civil Procedure, applicable by reference in Article 29(1)(e) of Decree-Law no. 10/2011 of 20 January (RJAT), and its drafting is governed by the orthography prior to the Orthographic Agreement of 1990.)

[1] Cf. Article 235 of Law no. 83-C/2013 of 31 December (State Budget for 2014).

Frequently Asked Questions

Automatically Created

What happens to IMT and Stamp Duty exemptions under the FIIAH regime when a property is sold instead of being used for permanent rental housing?
Under the FIIAH regime, IMT and Stamp Duty exemptions are conditional upon the property being leased for permanent residential purposes within three years of acquisition. If a property is sold instead of being rented, the exemptions cease to have effect retroactively. According to Article 8(16) of the FIIAH Tax Regime as amended by Law 83-C/2013, when properties are disposed of before the three-year compliance period elapses, the taxpayer must request the Tax Authority to assess the taxes that would have been due without the exemption. This triggers the obligation to pay IMT and IS as if the original exemption had never applied, calculated on the acquisition value.
Can a company challenge IMT and Stamp Duty liquidation acts before the CAAD arbitral tribunal under Decree-Law 10/2011 (RJAT)?
Yes, companies can challenge IMT and Stamp Duty assessment acts before the CAAD arbitral tribunal under the Legal Framework for Arbitration in Tax Matters (RJAT - Decree-Law 10/2011). Article 2(1)(a) of RJAT grants material competence to arbitral tribunals to review the legality of tax assessment acts, including those for IMT and Stamp Duty. The procedure involves filing a petition for constitution of a singular arbitral tribunal, which must be accepted by the President of CAAD. The taxpayer and Tax Authority have legal standing, and the tribunal is constituted within the timeframe established in Article 11(1)(c) of RJAT. This arbitral route provides an alternative to judicial courts for tax dispute resolution.
What are the legal requirements for maintaining IMT and IS tax exemptions for properties acquired by FIIAH funds for permanent rental?
To maintain IMT and IS exemptions for properties acquired by FIIAH funds, strict legal requirements must be met under Article 8 of the FIIAH regime as amended by Law 83-C/2013. First, properties must be intended exclusively for lease for permanent residential purposes. Second, a lease contract for permanent residential use must be executed within three years from when the property becomes part of the fund's assets. Third, the taxpayer must notify and provide proof to the Tax Authority of the actual lease within 30 days following the end of the three-year period. For properties acquired before January 1, 2014, the transitional regime under Article 236 applies, counting the three-year period from January 1, 2014. Failure to meet these requirements results in loss of exemptions and mandatory tax assessment.
What is the procedure for constituting a singular arbitral tribunal at CAAD to dispute IMT and Stamp Duty assessments?
The procedure for constituting a singular arbitral tribunal at CAAD to dispute IMT and Stamp Duty assessments follows the RJAT framework. The taxpayer must file a petition for constitution of an arbitral tribunal pursuant to Articles 2 and 10 of Decree-Law 10/2011. The petition must identify the contested assessment acts and state the grounds for illegality. Once filed, the President of CAAD accepts the petition and automatically notifies the Tax Authority as respondent. The singular arbitral tribunal is then constituted according to Article 11(1)(c) of RJAT, typically within a defined timeframe from acceptance. The Tax Authority files a response, and the tribunal may dispense with oral hearings under Article 18 of RJAT if the matter can be decided based on written submissions and documentary evidence.
Does the alienation of a property originally destined for permanent rental housing trigger the loss of FIIAH tax exemptions for IMT and IS?
Yes, the alienation of a property originally destined for permanent rental housing triggers the loss of FIIAH tax exemptions for IMT and IS. Article 8(16) of the FIIAH Tax Regime explicitly states that if properties are disposed of before the three-year compliance period has elapsed, the exemptions provided in Articles 6 to 8 cease to have effect. In such cases, the taxpayer must request the Tax Authority to assess the taxes that would have been due without the exemption, and this request must be made before the disposal of the property or liquidation of the FIIAH. This provision ensures that the tax benefits are only retained when the properties are actually used for the intended purpose of permanent residential rental, and prevents funds from obtaining exemptions for properties intended for immediate resale.