Process: 499/2018-T

Date: April 30, 2019

Tax Type: IMI

Source: Original CAAD Decision

Summary

This CAAD arbitral decision (Process 499/2018-T) addresses whether the Adicional ao Imposto Municipal sobre Imóveis (AIMI) legally applies to construction land owned by a real estate company. The applicant, A... S.A., challenged the 2017 AIMI assessment of €24,422.15 on two plots of construction land designated for services use. The company argued the assessment violated constitutional principles of equality (Article 13 CRP) and justice (Article 266 CRP), claiming discriminatory treatment since real estate constitutes their business activity rather than passive investment. The taxpayer further contested the interpretation of Article 135-B of the CIMI code, asserting AIMI should not apply to construction land intended for services. The Tax Authority (ATA) defended the assessment, arguing the law clearly establishes AIMI incidence on construction land regardless of potential use, as the legislator did not exclude such land from the tax base. The ATA maintained that owning real property as a business activity does not warrant preferential treatment under equality principles, and that companies in the real estate sector should not receive more advantageous treatment than general property owners. The tribunal found the case properly constituted under RJAT provisions, with the parties legitimately represented. Following written submissions without oral hearing, the arbitrator prepared to rule on whether the AIMI assessment and the rejection of the administrative appeal were illegal, and if so, whether compensatory interest under Article 43 LGT should apply upon tax restitution.

Full Decision

ARBITRAL DECISION

I – REPORT

1 – A..., S.A., holder of tax identification number..., with registered office at..., n.º..., ..., Room ..., in Lisbon, having as its local peripheral service the Financial Services Office of Lisbon ..., filed on 08/10/2018 a request for constitution of the Arbitral Tribunal, pursuant to the provisions of paragraph a) of no. 1 of article 2º, of no. 1 of article 3º and paragraph a) of no. 1 of article 10º, all of the RJAT, with the ATA being requested, with a view to the declaration of illegality of the tax assessment act for AIMI, referring to the year 2017, to which was assigned the assessment number 2017..., in the amount of EUR 24,422.15 based on articles 135º-A and following of the CIMI and the decision rejecting the Administrative Appeal, notified by official letter dated 04.07.2018, which was processed at the Financial Services Office of Cascais -....

2 – The request for constitution of the Arbitral Tribunal was made without exercising the option to designate an arbitrator, being accepted by His Excellency the President of the CAAD and automatically notified to the ATA on 09/10/2018.

3 – Pursuant to the provisions of no. 2 of article 6º of the RJAT, by decision of His Excellency the President of the Deontological Council, duly communicated to the parties within the legally applicable periods, the sole arbitrator Arlindo José Francisco was designated, who communicated to the Deontological Council and to the CAAD the acceptance of the charge within the regularly established period.

4 – The Tribunal was constituted on 20/12/2018 in accordance with the provisions contained in paragraph c) of no. 1 of article 11º of the RJAT, as amended by article 228º of Law no. 66-B/2012, of 31 December.

5 – With its request, the applicant seeks, as already stated, the declaration of illegality of the tax assessment act in question, in the amount of € 24,422.15 and of the decision rejecting the administrative appeal referred to, which had as its object the aforementioned AIMI assessment.

6 – It bases its position, in summary, on the fact that the applicant understands there to be error regarding the legal presuppositions through application of an illegal norm, based on the violation of the Principle of Equality provided for in article 55º of the LGT, in article 13º and in no. 4 of article 103º both of the CRP.

7 – Also that there is error regarding the legal presuppositions through application of an illegal norm, based on the violation of the Principle of Justice provided for in article 55º of the LGT and in no. 2 of article 266º of the CRP.

8 – And furthermore error in the interpretation of article 135º-B of the CIMI in subjecting to AIMI land for construction with real property whose potential use is for services, concluding finally to request the declaration of illegality both of the assessment act and of the act rejecting the administrative appeal already referred to and the consequent annulment of such acts, pursuant to no. 1 of article 163º of the CPA.

9 – In the ATA's response, also in summary, it sustains that there is no valid ground whatsoever for the applicant's claim that would call into question the aforementioned acts which should remain valid in the legal order.

10 – Beyond citing sufficient arbitral jurisprudence, it understands that the law, clearly and unequivocally, establishes the incidence of the tax on "land for construction," and this, regardless of the potential use that may be assigned to them, since they do not appear in the negative delimitation of incidence, that is, the legislator did not establish the exclusion of the tax incidence norm for land for construction on grounds related to their potential use.

11 – Finally it considers that the taxation of the applicant's real property assets does not violate the principle of tax equality and contributory capacity merely because the ownership of real property constitutes the very object of its activity, since that the incidence of AIMI on real property owned by companies that carry out their activity in the real estate sector, notably land for construction acquired with the intention of promoting thereon buildings intended for sale, is discriminatory or that these companies should merit more advantageous treatment than that granted to the generality of urban property owners.

II – CASE MANAGEMENT

The tribunal was regularly constituted and is competent ratione materiae, in accordance with article 2º of the RJAT.

The parties have legal personality and capacity, demonstrate themselves to be legitimate and are regularly represented in accordance with articles 4º and 10º, no. 2 of the RJAT and article 1º of Ordinance no. 112-A/2011, of 22 March.

Having joined to the file on 01/02/2019 the ATA's response, the Tribunal issued an order which is transcribed as follows: "No oral evidence is requested and there are no exceptions to consider, thus we consider unnecessary the holding of the meeting provided for in article 18º of the RJAT.

Thus, under the principles of the autonomy of the Arbitral Tribunal in the conduct of proceedings, celerity, simplification and procedural informality (articles 19º, no. 2, and 29º, no. 2, of the RJAT) the holding of the aforementioned meeting is dispensed with and it is determined that proceedings continue with optional written submissions for a period of 10 days, with the period for the Applicant's submissions commencing with notification of the present order and the period for the Respondent's submissions commencing with notification of the presentation of the Applicant's submissions. The date of 30-04-2019 is set for delivery of the arbitral decision. By that date, the Applicant shall provide proof to the CAAD of payment of the subsequent court fee."

On 18/03/2019 the applicant filed submissions with which it seeks to reinforce its points of view already explained in the initial petition.

On 26/03/2019 the respondent produced submissions maintaining what it had already set out in the response and reinforced with recent summary decisions of the Arbitral Tribunals, in line with its position.

Having reviewed everything and the proceedings being unaffected by nullities, it is appropriate to decide.

III – REASONING

1 – The questions to be determined, with relevance for the proceedings, are the following:

a) Whether to declare or not the illegality of the AIMI assessment 2017..., in the amount of EUR 24,422.15 and of the decision rejecting the administrative appeal against it directed.

b) Should the illegality of the aforementioned tax acts be declared, with the consequent annulment and restitution of the tax, whether this should be accompanied by the payment of compensatory interest, pursuant to article 43º of the LGT.

2 – Factual Matters

The relevant factual matters proven on the basis of the elements joined to the file are the following:

a) The applicant is a limited company, with registered office in national territory, being the owner of the real property listed in the assessment note joined to the file and which is hereby given as fully reproduced for all legal purposes and which comprises two plots of land for construction; article... of the Union of parishes of... and..., municipality of Cascais, district of Lisbon and... of the Union of parishes of..., ... and..., municipality and district of Porto, both intended for services.

b) It has as its corporate purpose, the purchase, in particular for resale, the sale, construction and leasing of rural or urban properties or autonomous fractions, including the establishment and negotiation of real property under horizontal property regime, the management of own real property, the promotion and negotiation of subdivision projects and urbanization and the administration of properties, the provision of services relating to any other real property investments and consulting in the context of the aforementioned activities.

c) The applicant, despite having filed an administrative appeal against assessment 2017..., which was rejected, as notified on 09/07/2018, made timely payment thereof, in the amount of EUR 24,422.15.

These are the facts considered proven with relevance to the decision of the case and result from the elements joined to the file by the parties and not contested by either of them.

There are no facts relevant to the decision that have not been given as proven.

3 – Legal Matters

By Law no. 42/2016, of 28 December, State Budget Law for 2017, AIMI was created, regulated by articles 135º-A to 135º-K of the CIMI, chapter XV of this legal instrument.

The subjective incidence is contained in article 135º-A, being of interest for the specific case, its nos. 1, 2 and 3, which are transcribed:

1 – The passive subjects of the additional municipal property tax are natural or legal persons who are owners, usufructuaries or superficiary right-holders of urban properties situated in Portuguese territory.

2 – For the purposes of no. 1, any structures or centers of collective interests without legal personality that appear in the tax matrices as passive subjects of municipal property tax are assimilated to legal persons, as is the undivided succession represented by the head of the family.

3 – The status of passive subject is determined in accordance with the criteria established in article 8º of the present Code, with the necessary adaptations, with reference to the date of 1 January of the year to which the additional municipal property tax relates.

Article 135º-B deals with objective incidence and which we also transcribe, the version applicable at the time:

"Article 135º-B (*)

Objective incidence

1 – The additional municipal property tax is levied on the sum of the taxable property values of urban properties situated in Portuguese territory of which the passive subject is the owner.

2 – The following are excluded from the additional municipal property tax: urban properties classified as "commercial, industrial or for services" and "other" in accordance with paragraphs b) and d) of no. 1 of article 6º of this Code."

Note should be made of the exclusion of urban properties to which paragraphs b) and d) of no. 1 (which is transcribed) of article 6º of the CIMI refer:

"Article 6º

Species of urban properties

1 – Urban properties are divided into:

a) residential;

b) commercial, industrial or for services;

c) land for construction;

d) other."

Given this legal framework, we summarize that the understanding of illegality pointed out by the applicant both as to the assessment act and as to the act rejecting the administrative appeal, both performed by the ATA, is essentially based on considering the existence of errors regarding the factual and legal presuppositions in the aforementioned acts, in applying an illegal norm, violating the principle of equality provided for in article 55º of the LGT and articles 13º and no. 3 of 104º, both of the CRP, to the extent that the applicant being a company whose activity comprises the purchase for resale, sale, construction and leasing of rural or urban properties or autonomous fractions, including the establishment and negotiation of real property under horizontal property regime, the management of own real property, the promotion and negotiation of subdivision projects and urbanization and the administration of properties, the provision of services relating to any other real property investments and consulting in the context of activities, the real property held by it being raw material or merchandise, the taxation in question penalizes and discriminates the applicant in relation to other companies that do not need to hold land for construction or properties with residential use, making it clear that the negative discrimination resulting from the application of article 135º-B of the CIMI violates the aforementioned normative provisions. It also considers that there is violation of the principle of Justice, which derives from article 55º of the LGT and no. 2 of article 266º of the CRP, supporting its position on jurisprudence of the TC and of the TCA of the South, understanding that the ATA should have refrained from issuing the assessment in question, out of respect for the principle of justice and non-discrimination, since it is evident that the legislator had the intention to exclude from taxation real property dedicated to productive activity and further that there was error in the interpretation of article 135º-B of the CIMI, in subjecting to AIMI land for construction with buildings to be constructed with potential destination for services, as is the case with the land for construction held by the applicant, citing CAAD decisions that considered such procedure violating the law, as constituting errors regarding the factual and legal presuppositions in applying a materially unconstitutional norm, and therefore the assessment act and the act rejecting the administrative appeal should be annulled pursuant to no. 1 of article 163º of the CPA;

For its part, the respondent considers that the applicant's claim has no merit nor any valid ground whatsoever, to the extent that the legislator did not establish the exclusion of the incidence norm for land for construction, regardless of its potential use, pointing in that direction, jurisprudence of the STA, namely its Decisions, 18/11/2009, rec.765/09, 20/4/2016, rec.824/15, Decisions TCA SOUTH, 9/02/2017 proc.5366/12 Proc. no. 907/07.9, of 11.16.2017. It understands that in the delimitation of real incidence and the exclusion of incidence, it is clear that the criterion used by the legislator was based on the types of properties to which article 6º of the CIMI refers and that the mere holding of real property assets of high value, regardless of whether or not they are dedicated to economic activity, is in itself revealing of high contributory capacity, superior, relative to the holding of property assets of reduced taxable property value. It cites various arbitral decisions that support its position that the ownership of real property assets of high value evidences a special economic capacity that enables it to contribute to the Financial Stabilization Fund of Social Security to which AIMI revenue is allocated, not seeing how the taxation in question collides with the principles of equality, justice and contributory capacity, nor does it entail an unjustified negative discrimination for holders of property who, like the applicant, are engaged in the purchase and sale of real property.

Having considered, albeit in summary, the position of the parties and considering that the Tribunal understands that AIMI is an additional municipal property tax, which was created, as already seen, by Law no. 42/2016, of 28 December, State Budget Law for 2017 and that the revenue was allocated to the Financial Stabilization Fund of Social Security, thus satisfying an objective of the government program to broaden the financing base of Social Security, at the same time introducing a tax that falls on holders of larger real property assets, reinforcing the overall progressivity of the system, by taxing higher amounts larger patrimonies, it is from this perspective that we will evaluate the specific question, taking into account also the majority jurisprudence of the CAAD, namely the decision delivered in Process 420/2018, which we follow and which, with all due respect, is transcribed in the part that considers the possible error regarding the legal presuppositions through application of an illegal norm which, in the understanding of the applicant will violate the principle of equality provided for in article 55º of the LGT, in article 13º and in no. 3 of article 104º of the CRP, the violation of the principle of justice provided for in article 55º of the LGT and in no. 2 of article 266º of the CRP and of error in the interpretation of article 135º-B of the CIMI, in subjecting to AIMI land for construction with real property whose potential use is for services.

Transcription:

"The wording of article 135º-B of the CIMI that came to be approved does not exclude the incidence of AIMI on real property dedicated to housing and land for construction used by legal persons in the context of their economic activity.

The legislative concern to "avoid the impact of this tax on economic activity" was announced in the Budget Bill for 2017 and was implemented, to some extent, through the exclusion from the scope of incidence of "urban properties classified as the species 'industrial', as well as urban properties licensed for tourism activity, the latter provided that its destination is duly declared and proven" and the deduction from the taxable value of the amount of "€ 600,000.00, when the passive subject is a legal person with agricultural, industrial or commercial activity, for real property directly dedicated to its functioning." However, it was not on the basis of the activity to which the properties are dedicated that the exclusion of incidence came to be defined, as in the wording that came to be approved the non-incidence was defined only on the basis of the types of properties indicated in article 6º of the CIMI, without any reference to dedication to the functioning of legal persons.

The concepts of dedication of a property, which presupposes a use, and the purpose to which it is destined, the "normal destination," underlying the classifications of real property, to which no. 2 of article 6º of the CIMI refers, are distinct concepts. If the legislative intention to exclude from incidence real property directly dedicated to the functioning of legal persons had been maintained in the final wording of the Budget, certainly the reference to this dedication that appeared in the proposal would have been maintained and which expressly manifested that legislative option. Thus, having been suppressed this reference to the dedication of the properties, there is no legal basis to conclude that residential properties and land for construction dedicated to the activity of legal persons are not relevant for the incidence of AIMI. Therefore, it is to be concluded that the dedication of real property to economic activities of legal persons does not exclude taxation in AIMI (outside of cases where these are properties that previously were exempt or not subject to taxation in IMI, which are not counted for purposes of AIMI, pursuant to no. 3 of article 135º-B of the CIMI). The holding of real property assets of high value, regardless of whether or not they are dedicated to economic activity, is tendentially revealing of high contributory capacity, superior to that which is to be presumed to exist when property of reduced value is held or when it does not exist, therefore, in principle, the limitation of taxation to the first situations is justified. However, there do not result explicitly from the Report of the Budget for 2017 nor from its parliamentary discussion the reasons that may underlie the distinction, for purposes of taxation in AIMI, between the taxable property values of properties classified as residential or land for construction (regardless of their actual dedication to those purposes) and those of urban properties that have other classifications, in light of article 6º of the CIMI. With regard to properties that have the classification of "other" in light of article 6º, nos. 2, paragraph d), and 4, of the CIMI, one may see a reason for distinction in the fact that these are essentially properties that do not have as their purpose activities generating income, namely land located in urban agglomerations that do not meet the necessary requirements for their classification as land for construction

nor are being used for agricultural or forestry purposes and buildings intended for spaces or public infrastructure or facilities. As concerns the exclusion of taxation in relation to properties intended for commerce, industry or services, one may discern an explanation in the purpose invoked for the creation of this new taxation, which is the financing of Social Security, ensured through the allocation of AIMI revenues to the Financial Stabilization Fund of Social Security, provided for in no. 2 of article 1º of the CIMI, as amended by Law no. 42/2016, of 28 December. The intention is not with AIMI to burden the taxation of luxury properties, as was primarily sought with item 28.1 of the TGIS, as real property assets of substantial value can be constituted by a plurality of properties of reduced value, but rather to create one more way of subsidizing the social security system, which is one of the constitutional duties of the State, provided for in article 63º, no. 2, of the CRP. The sustainability and stability of Social Security, always in doubt, is a permanent concern that has justified numerous initiatives, well evidenced in the Major Options of the Plan for 2017 (Law no. 41/2016, of 28 December,) and for 2018 (Law no. 113/2017, of 29 December) among which is included the diversification of financing sources, which constitutes a principle long adopted in the Framework Laws on Social Security (article 78º of Law no. 17/2000, of 8 August, article 107º of Law no. 32/2002, of 20 December and article 88º of Law no. 4/2007, of 16 January).

The essence of the principle of diversification of Social Security financing sources consists in the expansion of the bases for obtaining financial resources, with a view, in particular, to reducing the non-salary costs of labor (article 79º of Law no. 17/2000, article 108º of Law no. 32/2002, and article 88º of Law no. 4/2007, of 16 January), which can explain why the new AIMI taxation is not applied to legal persons holding properties intended for commercial, industrial and services activities, because the holding of properties of these types by legal persons is normally associated with the exercise of those activities, with the corresponding payment of contributions to Social Security, as employers [article 92º, paragraph b), of Law no. 4/2007, and articles 3º, paragraph a), and 14º, paragraph a), of Decree-Law no. 367/2007, of 2 November]. From this perspective, in which the legislator, lacking financing for Social Security, privileges the role of tax collector over the concern with the balance of business taxation, one may discern some grounds for distinguishing between the ownership of real property assets by persons who, presumptively, will develop activities connected with Social Security financing (who will already contribute to that financing) and the holding of real property not intended for those activities, whose owners, tendentially, will not be associated in the same way with that financing, at least not with the same intensity. Article 13º of the Constitution of the Portuguese Republic proclaims the principle of equality of citizens before the law. As has been uniformly understood by the Constitutional Court, the principle of equality, as a limit on legislative discretion, does not require equal treatment of all situations, but rather implies that those in equal situations are treated equally and those in unequal situations are treated unequally, in such a way as not to create arbitrary and unreasonable discriminations, because lacking sufficient material foundation. The principle of equality does not prohibit the establishment of distinctions, but rather arbitrary distinctions, devoid of objective and rational justification.

For what has been stated, it will not be completely devoid of objective and rational explanation the creation of a special taxation of property of high value intended to ensure Social Security financing limited to real property assets that will not already tendentially be connected with that financing. On the other hand, the creation of AIMI, as a complementary tax on real property assets, which aimed to introduce in taxation "a progressive element of personal basis, taxing higher amounts larger patrimonies" (Report of the Budget for 2017, page 60), is compatible with the objective that the taxation of property should contribute to equality among citizens, affirmed in no. 3 of article 104º of the CRP, as progressivity has as a corollary, tendentially, to impose greater taxation on those with greater contributory capacity. The contributory capacity of business legal persons, relevant to assessing the application of the principle of tax equality, is not evidenced only by income, in particular by the results of the activity to which the properties are intended. In truth, "property provides its owner with a special contributory capacity, advantages which by their nature escape personal income taxation: thus, ownership of property facilitates credit raising, strengthens its owner's negotiating position in concluding various contracts, makes it easier to multiply wealth allowing them to take risks where in principle they would not. From this perspective, property tax is viewed as something more than an extension of personal income tax - it is not a matter of overloading here income that is already subject to it but of reaching manifestations of contributory capacity that truly escape it"(...) Taxes on property are justified as they allow resources to be transferred for the benefit of the working class, instituting a "qualitative progressivity" complementary to the progressivity in quantity of personal income taxes". On the other hand, if it is true that the different destinations of properties do not necessarily imply distinction in the level of contributory capacity, the exclusion of taxation of properties especially vocational for productive activity, in particular "commercial, industrial or services," will find other justification (beyond what has already been mentioned presumable greater contribution of these activities to Social Security through contributions), as it ultimately comes down to favor of these activities, which is in harmony (and, therefore, will have constitutionally acceptable grounds) with the obligation of the State to promote the increase in economic well-being, which presupposes the proper functioning of wealth-creating activities and constitutes one of its priority duties in the economic field [article 81º, paragraph a), of the CRP]. Being this a duty constitutionally considered as priority, the first listed in this norm, certainly it will not be incompatible with the CRP to give it preferential protection when confronted with the constitutional duties of the State regarding housing indicated in article 65º of the CRP, which, obviously, are also protected through the proper functioning of wealth-creating activities. Thus, if it is true that the AIMI regime creates situations of discrimination in the taxation of companies with the same contributory capacity evidenced by property, on the assumption that there is need of money and new ways to collect it must be found (as referred to in the Report of the Budget for 2017), there will be some justification for taxation to be imposed on some companies and not on others with the same or greater contributory capacity inherent to property, especially in light of the majority constitutional jurisprudence cited by the Tax and Customs Authority which reveals that it is constitutionally tolerable for the interests of the State as tax collector (in this case, the sustainability of Social Security, demanded by the principles of trust and security) to prevail over strict respect for the principle of equality. On the other hand, as the legislative objective is not the taxation of luxury housing but rather to obtain one more means of financing Social Security, in line with the political choice of diversification, through "a tax that falls on holders of larger real property assets, reinforcing the overall progressivity of the system" (page 57 of the Report of the State Budget for 2017), it is in light of these objectives that it is necessary to assess whether violation of the principle of proportionality occurs. From this perspective, it appears that this new taxation is not incompatible with the principle of proportionality, as it is appropriate to the intended purpose (it provides for the increase in revenues intended to be obtained), it is necessary (in light of the legislative choice to increase Social Security revenues with diversification of sources) and a reasonable measure is not exceeded, particularly regarding legal persons, as the rates of the new tax are not high (and are lower for legal persons than for natural persons, pursuant to article 135º-F), the tax paid is deductible from IRC taxable base (article 135º-J), considerable amounts are deducted from the taxable value (article 135º-C) and it has not been demonstrated, nor is there reason to believe, that the amounts collected exceed what is necessary for the purpose of reinforcing the sustainability and stability of Social Security".

Sharing this perspective the Tribunal does not perceive that in the taxation here challenged, error regarding the legal presuppositions has been committed by considering that the principles of equality and justice referred to in article 55º of the LGT, in article 13º, in no. 3 of article 104º and no. 2 of article 266º of the CRP, respectively, have not been violated, while also there was no error in the interpretation of article 135º-B of the CIMI in subjecting to AIMI land for construction with real property whose potential use is for services, as decided in the Decision whose part has just been transcribed.

As is derived from article 135º-B, the taxation of real property dedicated to housing and land for construction used by legal persons in the context of their economic activity was not excluded, the exclusion of incidence was based only on the species of properties to which article 6º of the CIMI refers, precisely those referred to in paragraphs b) and d) of its no. 1 and no others, there being, in the Tribunal's understanding, no misinterpretation of the cited article.

Taxation in AIMI cannot be compared with the taxation provided for in the revoked item 28 of the TGIS, to the extent that the legislator created a designation and a system of taxation with express reference to the criteria specific to the CIMI, and cannot be transported to AIMI criteria or decisions taken in the context of that revoked norm, as is deduced from the argumentation used by the applicant.

Thus neither the assessment in question nor the rejection of the respective administrative appeal suffer from the errors pointed out by the applicant, and therefore the claim is without merit.

  1. Request for Payment of Compensatory Interest

Given what is stated in point 3, the consideration of the question of compensatory interest is without interest.

IV – DECISION

In view of the above, the tribunal decides as follows:

a) To declare without merit the request for arbitral ruling against the AIMI assessment numbered 2017..., in the amount of EUR 24,422.15 and against the decision rejecting the Administrative Appeal notified by official letter dated 04.07.2018, which was processed at the Financial Services Office of Cascais -..., with both acts remaining valid in the legal order.

b) To fix the value of the case at € 24,422.15 in accordance with the provisions contained in article 299º, no. 1, of the CPC, article 97º-A of the CPPT, and article 3º, no. 2, of the RCPAT.

c) Costs charged to the applicant, under the authority of no. 4 of article 22º of the RJAT, fixing the respective amount at € 1,530.00 in accordance with the provisions of table I referred to in article 4º of the RCPAT.

Notify.

Lisbon, 30 April 2019

Text drawn up by computer, pursuant to article 131º, no. 5 of the CPC, applicable by reference of article 29º, no. 1, paragraph e) of the RJAT, with blank lines and revised by the tribunal.

The sole arbitrator,

Arlindo Francisco

Frequently Asked Questions

Automatically Created

What is the Adicional ao Imposto Municipal sobre Imóveis (AIMI) and how does it apply to construction land in Portugal?
The Adicional ao Imposto Municipal sobre Imóveis (AIMI) is a supplementary property tax in Portugal that applies to urban real property holdings exceeding certain thresholds. For construction land, Article 135-B of the CIMI code establishes that AIMI applies to 'terrenos para construção' (land for construction) based on their classification, regardless of the potential use designated for such land. The legislator did not create exemptions based on intended use (residential, commercial, or services), meaning construction land falls within the positive scope of AIMI incidence unless specifically excluded. This interpretation has been consistently upheld in arbitral jurisprudence, establishing that the tax applies to all construction land owned by both individuals and companies.
Can companies challenge AIMI tax assessments based on the constitutional principle of equality under Article 13 of the Portuguese Constitution?
Yes, companies can challenge AIMI assessments based on constitutional equality principles under Article 13 of the Portuguese Constitution and Article 55 of the LGT (Lei Geral Tributária). However, such challenges face significant hurdles. The Tax Authority and arbitral tribunals have consistently held that AIMI taxation of corporate-owned properties does not violate equality principles merely because real property constitutes the company's business activity rather than passive investment. The jurisprudence establishes that companies operating in the real estate sector, including those holding construction land for development and sale, should not receive more favorable treatment than general property owners. The principle of horizontal equity requires similar taxation of similar wealth manifestations, and owning construction land represents taxable capacity regardless of whether it is held for business purposes or personal investment.
Does AIMI apply to construction land designated for services use under Article 135-B of the CIMI code?
Yes, AIMI applies to construction land designated for services use under Article 135-B of the CIMI code. The law establishes the tax incidence on 'terrenos para construção' without distinguishing based on potential use categories (residential, commercial, services, or industrial). The legislator's deliberate choice not to exclude construction land based on intended use means that all such land falls within the AIMI tax base. Portuguese arbitral tribunals have rejected arguments that construction land intended for services should be exempt, interpreting the statute as applying a broad incidence rule. Only properties explicitly listed in the negative delimitation of incidence (specific exemptions) escape AIMI taxation. Since construction land for services does not appear among statutory exemptions, it remains subject to AIMI regardless of the planned building use.
How can taxpayers contest an AIMI liquidation through arbitral proceedings at CAAD after a rejected Reclamação Graciosa?
Taxpayers can contest an AIMI liquidation through the Centro de Arbitragem Administrativa (CAAD) by filing a request for constitution of an arbitral tribunal under Article 2(1)(a) and Article 10(1)(a) of the RJAT (Regime Jurídico da Arbitragem Tributária). This option becomes available after the Tax Authority rejects a Reclamação Graciosa (administrative appeal). The taxpayer must file the arbitration request within the legal deadline following notification of the rejection decision. The process involves: (1) submitting the arbitration request without necessarily designating an arbitrator; (2) automatic notification to the Tax Authority; (3) appointment of an arbitrator by the CAAD President; (4) constitution of the tribunal; (5) exchange of written submissions; and (6) issuance of the arbitral decision. This administrative arbitration provides an alternative to judicial courts for resolving tax disputes efficiently.
Does the application of AIMI to corporate-owned properties violate the principles of justice and equality under Portuguese tax law?
The application of AIMI to corporate-owned properties does not violate principles of justice and equality under Portuguese tax law, according to established arbitral jurisprudence. While taxpayers argue that taxing business assets (construction land held for development and sale) differently from passive investments violates Article 13 CRP (equality) and Article 266(2) CRP (justice), tribunals have rejected this reasoning. The law treats all construction land uniformly regardless of ownership structure or business purpose. The principle of contributory capacity supports taxing property wealth manifestations similarly, whether held by individuals for investment or by companies for business operations. Differential treatment would require explicit legislative choice, which the CIMI code does not provide. Real estate companies cannot claim discriminatory treatment simply because property constitutes their business inventory rather than passive holdings, as both represent taxable capacity justifying AIMI incidence.