Summary
Full Decision
ARBITRAL DECISION
I – REPORT
1. A…, SA, with registered office at … …, no. …-… …-… Lisbon, tax identification number …, hereinafter referred to as the "Claimant", management company of the real estate investment fund "B… – CLOSED REAL ESTATE INVESTMENT FUND FOR RESIDENTIAL RENTAL, registered with the Securities Commission, with tax identification number … (hereinafter Claimant) filed a request for establishment of an Arbitral Tribunal, pursuant to article 2, no. 1, subparagraph a), of Decree-Law no. 10/2011, of January 20, hereinafter referred to as "RJAT" and Ordinance no. 112-A/2011, of March 22, for the challenge and declaration of illegality of two tax assessments, namely:
- Assessment of Municipal Transfer Tax (IMT) with reference no. …, in the amount of €8,598.21;
- Assessment of Corporate Income Tax (IS) with reference no. …, in the amount of €1,915.58.
2. The disputed tax acts relate to the property described in the urban property registry under urban article …, fraction "U", in the Union of Parishes of …, …, … and …, in the municipality of Oeiras.
3. The request for establishment of the Arbitral Tribunal, submitted by the Claimant on 16-01-2017, was accepted on the same date by His Excellency the President of CAAD and notified to the Tax and Customs Authority, in accordance with the legally provided terms and purposes. The Claimant opted not to appoint an arbitrator, whereby, pursuant to no. 1 of article 6 of the RJAT, the Ethics Council of the Administrative Arbitration Centre, on 06-03-2017, appointed the undersigned as arbitrator. Thus, in compliance with the provision in subparagraph c), no. 1 of article 11 of the RJAT, as amended by article 228 of Law no. 66-B/2012, of December 31, the Single Arbitral Tribunal was constituted on 21-03-2017. On 23-03-2017 an arbitral order was issued to the Tax and Customs Authority (TA) to submit a response within the legal time limit, in accordance with and for the purposes of the provisions of nos. 1 and 2 of article 17 of the RJAT.
The Respondent duly submitted its response within the legal time limit, which is hereby deemed fully reproduced. On 01-05-2017 an arbitral order was issued for the parties to pronounce on the possibility of dispensing with the holding of the meeting provided for in article 18 of the RJAT, as the matter under discussion in the case is exclusively a matter of law, with no evidence to be produced, and the case could proceed to arguments and final decision.
On 16-05-2017 the Claimant expressed itself favorably, manifesting the intention to submit written arguments. The Respondent TA likewise manifested its agreement, whereby, in compliance, an arbitral order was issued dispensing with the holding of the meeting provided for in article 18 of the RJAT, setting a time limit for the parties to argue in writing and indicating the probable date for the pronouncement of the arbitral decision until June 26, 2017, with the claimant being required to pay the subsequent arbitration fee within the time fixed for the decision.
The parties submitted their arguments, respectively, on 16-05-2017 and 18-05-2017.
B) OF THE CLAIM FILED BY THE CLAIMANT:
4. The Claimant presents the present request for arbitral pronouncement, as stated in the arbitral petition filed, to "ascertain whether article 236 (Transitional Provision within the scope of the Special Regime Applicable to FIIAH and SIIAH) provided by Law no. 83-C/2013, of December 31 - insofar as it determines the application of the current Tax Regime of FIIAH 'to properties that have been acquired by FIIAH before January 1, 2014, counting, in those cases, the three-year period provided for in no. 14 from January 1, 2014' - constitutes a new regime of expiry of the exemptions provided for in no. 7, subparagraph a) and no. 8 of article 8 (Tax Regime) of the Tax Regime of FIIAH, revealing a flagrant and unequivocal violation of the principle of non-retroactivity of tax law, embodied in article 103 (Tax System), number 3, of the Constitution of the Portuguese Republic."
The Claimant requests that the Arbitral Tribunal annul the above-described assessments, on the grounds that they suffer from unconstitutionality, since they are based on article 236 (Transitional Provision within the scope of the Special Regime Applicable to FIIAH and SIIAH) provided by Law no. 83-C/2013, of December 31 (State Budget for 2014), insofar as it determines the application of the current Tax Regime of FIIAH "to properties that have been acquired by FIIAH before January 1, 2014, counting, in those cases, the three-year period provided for in no. 14 from January 1, 2014" - constitutes a new regime of expiry of the exemptions provided for in no. 7, subparagraph a) and no. 8 of article 8 (Tax Regime) of the Tax Regime of FIIAH, revealing a violation of the principle of non-retroactivity of tax law, embodied in article 103, number 3, of the Constitution of the Portuguese Republic.
The Claimant further submits that the violation of this constitutional principle constitutes a fundamental guarantee of taxpayers (fundamental right), the violation of which generates nullity of the tax acts performed.
In summary, the Claimant alleges that at the moment the property in question entered the Fund's assets, the exemptions from Municipal Transfer Tax and Stamp Duty (IS), taxes of single obligation, were definitively crystallized in the legal order, and that at the date of entry of the properties into the respective real estate fund, the exemptions were not conditioned to the verification of any fact or circumstance, nor were they subject to any regime of expiry. Thus, the subsequent imposition of such facts or circumstances to exemptions crystallized in the legal sphere of the Claimant suffers from unconstitutionality due to violation of the principle of non-retroactivity of tax law (authentic retroactivity, insofar as the tax facts that the new law intends to regulate have already produced all their effects under the old law).
But, even if this is not understood, the Claimant alleges that the assessments would always have to be annulled due to a defect of illegality, generating voidability.
These are, briefly, the arguments that the Claimant invokes in its request and which it reinforces in the arguments submitted to the case file, which are hereby deemed fully reproduced. The Claimant submitted to the case file a copy of the legal opinion issued by Professors C… and D…, on the question of the (un)constitutionality of the provision contained in article 236 of Law no. 83-C/2013 of December 31.
The Claimant concludes its request by alleging the nullity of the assessments based on their unconstitutionality, and, subsidiarily, should this not be upheld, the annulment of the assessments due to illegality. It further requests the reimbursement of the total amount of tax assessed and paid and of compensatory interest that is due until the date of such reimbursement.
C – THE RESPONSE OF THE RESPONDENT
5. The Respondent TA, duly notified for this purpose, submitted its response in a timely manner, in which, by way of contestation, it alleged, in summary, the following:
a) Exception of material incompetence of the arbitral tribunal, since the claim filed by the Claimant is based on the invocation of abstract unconstitutionality of the provision in light of which the disputed tax assessments were issued, a matter reserved exclusively to the Constitutional Court.
b) The impossibility for the TA to disapply the legal provision in question, on the grounds of its unconstitutionality, as it is subject to the principle of legality, as results from the provisions of articles 266, no. 2 of the CRP, 3, no. 1 of the CPA and 55 of the LGT. This matter is duly addressed and treated by doctrine and the jurisprudence of the superior courts. From its perspective, the tax acts in question did not violate any legal or constitutional provision and the assessments are a consequence of the destination given to the property being other than rental, which already resulted objectively from the 2008 version of the law that introduced into the system the legal regime applicable to these Funds. The tax regime applicable to FIIAH, from its inception, must comply with the prerequisite of being intended exclusively for rental for permanent residential purposes. They were always conditioned to this prerequisite, whereby Law 83-C/2013, of December 31, merely came to clarify the criterion already required. It develops abundant argumentation around the regime applicable to tax benefits and to the verification or monitoring of the conditions that determine it and invokes abundant arbitral jurisprudence that has confirmed this understanding.
It concludes by the incompetence of the Arbitral Tribunal in the matter of abstract review of unconstitutionality and, should this not be upheld, by the lack of merit of the arbitral claim and confirmation of the legality of the assessments.
II - PROCEDURAL REQUIREMENTS
6. The Arbitral Tribunal is duly constituted.
Regarding the question of the (in)competence of the Tribunal:
7. The Respondent alleged the incompetence of the Arbitral Tribunal, since in its claim the Claimant expressly states that the object of this request is to ascertain whether article 236 (transitional provision within the scope of the Special Regime Applicable to FIIAH and SIIAH) provided by Law no. 83-C/2013, of December 31 - insofar as it determines the application of the current Tax Regime of FIIAH to properties that have been acquired by FIIAH before January 1, 2014, counting, in those cases, the three-year period provided for in no. 14 from January 1, 2014 - constitutes a new regime of expiry of the exemptions provided for in no. 7, subparagraph a) and no. 8 of article 8 (Tax Regime) of the Tax Regime of FIIAH, revealing a flagrant and unequivocal violation of the principle of non-retroactivity of tax law, embodied in article 103 (Tax System), number 3, of the Constitution of the Portuguese Republic.
In light of the Claimant's allegation, which expressly states that it presents the arbitral claim to ascertain the unconstitutionality of the transitional provision contained in article 236 of the State Budget for 2014, one could conclude, as the TA does, that the allegation in question is based on an assessment of abstract unconstitutionality that exceeds the competence of the arbitral tribunal. However, considering the arbitral claim as a whole, we cannot agree with this conclusion of the TA. In light of all that is alleged in the arbitral claim and, in particular, the specific claim that the Claimant formulates, it is concluded that it invokes the unconstitutionality of the aforementioned transitional provision to thereby conclude on the concrete illegality of the assessments (based on violation of the Constitution and of the Law) and, consequently, to request their annulment.
Thus, the allegation of unconstitutionality on which its claim is based relates specifically to its application to the case of the urban property identified in the case file, considering the facts that occurred. Therefore, what is at issue is the alleged concrete unconstitutionality, that is, the application of the transitional provision to the property described in the case file, as a basis for the alleged illegality of the assessments here disputed.
In this light, taking into account the configuration of the claim and the cause of action, this arbitral tribunal is competent to know of the matter, as results from the provision of article 2, no. 1, subparagraph a) of the RJAT.
It is concluded, therefore, that the arbitral tribunal is materially competent, pursuant to article 2, no. 1, subparagraph a), of the RJAT, and, being the defendant entity (TA) the formal author of the disputed tax assessments, it is a legitimate party in the present arbitral proceedings.
8. The Parties enjoy legal standing and capacity, are legitimate and are legally represented (cf. articles 4 and 10, no. 2 of the RJAT and article 1 of Ordinance no. 112/2011, of March 22).
The case does not suffer from defects that would invalidate it, therefore all procedural requirements are met for the arbitral tribunal to know of the claim.
9. Taking into account the documentary evidence submitted to the case file and what has been alleged by the parties in the case file, it is necessary to establish the factual matter relevant for understanding the decision, which is established as follows.
III – Factual Matter
A) Facts Established
10. As relevant factual matter, this tribunal considers the following facts as established:
a) The Claimant company, designated as A… – Investment Fund Management Company, SA is a management company of the real estate fund B… - CLOSED REAL ESTATE INVESTMENT FUND FOR RESIDENTIAL RENTAL, registered with the Securities Market Commission, with tax identification number …;
b) In the scope of its activity, the Claimant acquired on 18-12-2013 the urban property described in the urban property registry, under article U-…, of the Union of Parishes of …, …, … and …, in the municipality of Oeiras;
c) This property was acquired by the Claimant in 2013, for the purpose of residential rental;
d) On 29-01-2014 the Claimant assessed Municipal Transfer Tax with reference to this acquisition, with the benefit of exemption from Municipal Transfer Tax and Stamp Duty, under the tax legal regime of FIAH, Law 64-A/2008, of December 31;
e) On 08-11-2016, the Claimant requested the assessment of Municipal Transfer Tax and Stamp Duty, with reference to the property described, with the declared value of €239,447.50 and indicated as the reason for the assessment: "… because the aforementioned fraction will be sold"
f) As a consequence, the following assessments were issued:
- Municipal Transfer Tax Assessment no. …, in the amount of €8,598.21;
- Stamp Duty Assessment no. …, in the amount of €1,915.58.
g) The assessments were paid on November 9, 2016.
h) The arbitral claim was filed on 16-01-2017.
B) FACTS NOT ESTABLISHED
11. There are no facts relevant to the decision that should be considered as not established.
C) GROUNDS FOR THE FACTS ESTABLISHED
12. The facts described were considered as established based on the documentary evidence that the Claimant submitted to the case file, confirmed by the TA. Therefore, taking into account the positions assumed by the parties and the documentary evidence submitted to the case file, the facts listed were considered proven, with relevance to the decision, as mutually recognized and accepted by the parties.
IV – ON THE LAW: grounds for the merits decision
13. Having established, as stated above, the factual matter, it is important to know the question of law raised by the Claimant, which consists in determining whether the assessments of Municipal Transfer Tax and Stamp Duty that are the subject of the request for arbitral pronouncement suffer from the alleged illegalities.
It is necessary to decide.
14. As we saw above, the Claimant bases its request for annulment of the assessments on their illegality resulting from the application of the provision of article 236 of Law no. 83-C/2013 of December 31, which it considers to be unconstitutional, which is why the TA should not have applied such legal provision.
The Claimant alleges that the disputed tax assessments arise exclusively from the provision of article 236 of Law 83-C/2013, which appears to be unconstitutional due to violation of the principle of prohibition of tax retroactivity.
Thus, the question that the Claimant wishes to have examined is that of the concrete unconstitutionality of the application of the aforementioned provision to the case at hand. For this purpose, it alleges that the assessments of Municipal Transfer Tax and Stamp Duty here disputed arise from the retroactive application of the aforementioned provision, but, in reality, the reason that led the Claimant to assess the aforementioned amounts of Municipal Transfer Tax and Stamp Duty was the sale of the property in 2016. That is, the fact that triggered the assessments was the decision to sell the property, acquired under the FIIAH regime with the tax benefit granted on the assumption that it would be given a specific purpose: residential rental. In deciding in 2016 to sell it, the Claimant found itself obliged to proceed with the assessment of the respective amounts of tax. Thus, it appears clear that the reason that led to the assessments was not the application of the transitional provision, but rather the assignment of a purpose different from what the law provided as a prerequisite for the tax benefits of the exemption that occurred at the time of its acquisition prior to December 31, 2013.
Given this, the question of the unconstitutionality of the transitional provision, as raised by the Claimant, does not appear to be appropriate or even relevant to the decision of the case, as it is not the true reason that determined the issuance of the assessments in question.
What is relevant for the proper decision of the case is, moreover, to know whether the tax benefits recognized under the legal regimes designated as FIIAH and SIIAH were unconditional and independent of the future purpose that might be given to the properties. Well, there is no doubt that the answer to this question is negative, as will be demonstrated.
15. Under the tax legal regime applicable to FIAH, it follows that the tax benefit of exemption from Municipal Transfer Tax and Stamp Duty was, since 2008, subject to one single and exclusive condition: that of the properties being intended for rental for permanent residential purposes. From this it follows that, irrespective of the regime introduced by the aforementioned transitional provision, they would always be obliged to pay the taxes in question, if and when they gave another purpose to the property other than that provided for in the law. This is precisely what happened in the present case.
Nevertheless, the Claimant argues that the TA should not have assessed the taxes in question, under penalty of violation of the principle of non-retroactivity, which constitutes a violation of a fundamental right, generating nullity of the assessment act. Well, that is not correct. First of all, because the assessments are not based on the aforementioned transitional provision, but rather on a consequence that flows from the original legal regime, applicable to real estate funds, and which has always conditioned the tax benefits granted to the purpose to be given to the real property in question.
Thus, the TA is correct when it alleges that there is no violation of the principle of non-retroactivity, since the assessments originate from a concrete fact that has nothing to do with the transitional provision, but rather the decision to sell the property, giving it a purpose different from that which the law imposes (rental for residential purposes), the prerequisite upon which the tax benefit granted was based.
16. Still with reference to the raised question of unconstitutionality, it is fair to recognize that the TA is correct when, based on the jurisprudence of our superior courts, it invokes its submission to the law and, by virtue of this, the impossibility of disapplying a provision based on the interpretation it makes as to its unconstitutionality. However, this question is secondary to what is relevant for the decision of the present case, since, as stated earlier, what is at issue is to ascertain whether the issuance of the disputed assessments results from the application of the provision of article 236 of the State Budget for 2014, or whether it results from the fact that the Claimant decided to give the property another purpose distinct from that which allowed it to benefit from the tax exemption.
As results from what has been stated, it is the understanding of this tribunal that the decisive question is not that of the possible unconstitutionality of the application of the transitional provision, but rather whether the disputed assessments are or are not illegal in light of the specific legal regime to which they are subject (FIIAH and SIIAH).
17. Let us proceed to analyze the legal regime applicable to real estate investment funds for residential rental (FIIAH) and real estate investment companies for residential rental (SIIAH) and the prerequisites of the tax benefits granted. This regime was established by Law no. 64-A/2008, of December 31 (State Budget for 2009), which in its article 8, established the tax regime applicable to FIIAH.
With regard to Municipal Transfer Tax (IMT), the Tax Regime of FIIAH defined, in its article 8, no. 7, the following:
Article 8
(Tax Regime)
(…)
"7 — The following are exempt from IMT:
a) Acquisitions of urban properties or autonomous fractions of urban properties intended exclusively for rental for permanent residential purposes, by the investment funds referred to in no. 1;
b) Acquisitions of urban properties or autonomous fractions of urban properties intended for permanent personal residential purposes, as a result of the exercise of the purchase option referred to in no. 3 of article 5 by the tenants of the properties that are part of the assets of the investment funds referred to in no. 1."
Law no. 83-C/2013, of December 31 (State Budget for 2014) added to this article 8 numbers 14 to 16, which provide as follows:
"14 - For purposes of the provision of nos. 6 to 8, urban properties shall be deemed to be intended for rental for permanent residential purposes whenever they are subject to a residential rental contract for permanent residential purposes within three years from the moment they became part of the fund's assets, and the taxpayer must communicate and provide proof to the TA of the respective effective rental, within 30 days following the end of the said period.
15 - When the properties have not been subject to a rental contract within the three-year period provided for in the previous number, the exemptions provided for in nos. 6 to 8 become ineffective, and in that case the taxpayer must request from the TA, within 30 days following the end of the said period, the assessment of the respective tax.
16 - If the properties are sold, with the exception of the cases provided for in article 5, or if the FIIAH is subject to liquidation, before the period provided for in no. 14 expires, the taxpayer must likewise request from the TA, before the sale of the property or the liquidation of the FIIAH, the assessment of the tax due in accordance with the previous number."
Law no. 83-C/2013, of December 31 further established in its article 236 a transitional regime within the scope of the special regime applicable to FIIAH and SIIAH as follows:
"1 - The provision of nos. 14 to 16 of article 8 of the special regime applicable to FIIAH and SIIAH, approved by articles 102 to 104 of Law no. 64-A/2008, of December 31, applies to properties that have been acquired by FIIAH as from January 1, 2014.
2 - Without prejudice to the provision of the previous number, the provision of nos. 14 to 16 of article 8 of the special regime applicable to FIIAH and SIIAH, approved by articles 102 to 104 of Law no. 64-A/2008, of December 31, is likewise applicable to properties that have been acquired by FIIAH before January 1, 2014, counting, in those cases, the three-year period provided for in no. 14 from January 1, 2014."
Now, in the present case, the application of these provisions added by the State Budget for 2014 is not at issue, whereby the discussion of the question of possible unconstitutionality of its retroactive application is completely foreign to the question to be decided. The same can be said of the learned opinion submitted with the case file, which specifically addresses the question of possible unconstitutionality of the retroactive application of these provisions added by the State Budget 2014.
18. Returning to the question to be decided in the case, it is important to revisit the special regime applicable to FIIAH and SIIAH, contained in Law no. 64-A/2008, of December 31 (State Budget for 2009), which approved the special regime applicable to these investment funds and real estate investment companies. This regime provides that: "applies to FIIAH or SIIAH constituted during the five years following the entry into force of the present law and to the properties acquired by them in the same period", that is, between January 1 and December 31, 2013. The establishment and operation of FIIAH are governed by the provisions of the Legal Regime of Real Estate Investment Funds, approved by Decree-Law no. 60/2002 of March 20.
Thus, it results from this special regime that borrowers under residential credit contracts who proceed to sell the property subject to the contract to a FIIAH may enter into a rental contract with the management entity of the fund, and prior to the conclusion of the contract for transfer of the property to the FIIAH, information must be provided on the essential elements of the transaction. It further results from this legal regime that the rental constitutes the tenant in a right of purchase option of the property from the fund, capable of being exercised until 31-12-2020, which is only transferable by death of the holder.
It is evident that the legislator's objective with this regime was to provide alternative solutions for mortgagees, in times of acute economic crisis, by encouraging the sale of properties and the conclusion of a rental contract with the option to purchase at the end of the contract.
But the legislator did not grant this exemption unconditionally. The exemption presupposed, in the original version of the Law (2008), a specific purpose of the property: rental for residential purposes, under the conditions legally provided. Therefore, any other subsequent purpose, different from that provided for in the law, would have to have as a consequence the production of the respective tax assessments. Besides, if it were not so, the legislator would have granted an unconditional tax benefit, capable of being used, perhaps, abusively and unfairly by the inequalities it would generate in comparison with all situations in which the same business acts are subject to tax.
19. Given this, the legislator granted some tax exemptions to this type of real estate fund, as a measure to encourage rental for permanent residential purposes, with the rental contract being able to have a clause granting a purchase option in favor of the tenant. The exemptions granted are as follows:
a) exemption from CIT as to the income of FIIAH (of any nature) constituted between January 1, 2009 and December 31, 2013;
b) exemption from PIT and CIT as to income relating to participation units;
c) exemption from PIT on capital gains resulting from the transfer of properties intended for personal residential purposes in favor of investment funds that occurs as a result of the conversion of the property right in those properties into a rental contract;
d) exemption from IMI on properties intended for rental for permanent residential purposes, as long as these remain in the ownership of the FIIAH;
e) exemption from IMT as to acquisitions of urban properties or autonomous fractions of urban properties intended exclusively for rental for permanent residential purposes, by the investment fund, as well as acquisitions resulting from the exercise of the purchase option by the tenants of properties that are part of the assets of the investment funds;
f) Exemption from Stamp Duty on all acts performed, provided that they are connected with the transfer of urban properties intended for permanent residential purposes that occurs as a result of the conversion of property rights into rental rights over the same properties, as well as the exercise of the purchase option provided for in the contract.
This applies, with the necessary adaptations, to real estate investment companies that are established under the special law and that comply with the provision of the special regime applicable to FIIAH. The exemptions mentioned constitute and are encompassed within the concept of tax benefits, as provided for in the Tax Benefits Statute (EBF), as they assume the nature of measures of an exceptional character, instituted for the protection of relevant public interests of an extrafiscal nature superior to those of taxation that they prevent. Tax benefits are expressed in facts that, being subject to taxation, are preventive of the birth of the tax obligation. This special regime, created in 2008 to take effect from 2009, had a clear purpose of responding to a situation of crisis, protecting the interests of families with difficulties in paying the mortgage payment, encouraging the use of rental, with the purchase option for the tenant, freeing the business transactions inherent to the tax burden to which they would be subject in normal circumstances. Therefore, these special regimes can be, and normally are, granted for a certain period of time.
20. From what has been stated, it is clear that the operationality of the tax benefits provided for in this special regime are conditioned to a prerequisite, which is that the properties be subject to a "rental contract for permanent personal residential purposes."
Therefore, if the urban properties or fractions come to be intended for another purpose other than rental, then the tax benefits granted cannot be maintained. This conclusion imposes itself on its own and not by recourse to the transitional provision of article 236 of the State Budget for 2014. The only novelty that this law introduces as to properties acquired prior to its entry into force is the introduction of a deadline, after which, if the property is not given the purpose prescribed by law, then, regardless of whether or not they come to be sold, intended for another purpose or not, they will become subject to the assessment of the taxes from which they were exempted at the time of their acquisition. This application may possibly raise questions of unconstitutionality, which this tribunal will not address, given that in the specific case of the present case, it was not this that triggered the disputed assessments.
The fact is that, from the legal regime in question, it follows that the urban property that comes to have a purpose different from rental for personal residential purposes will then be subject to the IMT and Stamp Duty that would be due, as a result of the failure of one of the prerequisites for the application of the tax benefit. This means that what was subject to exemption may cease to be so and become subject to taxation, whenever the prerequisite(s) for the exemption legally provided are not met and its future condition. Thus, if one of these urban properties comes to be sold or be the subject of any other type of legal transaction different from that which is provided for in the law as exempt from taxation (rental for personal residential purposes), the tax exemption granted ceases. Nor could it be otherwise, under penalty of total frustration of the extrafiscal objectives that the legislator intended to protect with the regime introduced in 2008.
As for the nature of the taxes in question, which are characterized as taxes of single obligation, this in no way prevents the exemption granted from being subject to the future condition imposed by law, in this case, the purpose of the property for rental for permanent residential purposes.
21. As for the provisions added by the State Budget for 2014 (nos. 14, 15 and 16 of article 8 and the transitional provision of article 236), the legislator came to clarify some concepts underlying the special regime, which the 2008 law had not clarified in such explicit form, namely, the concept of "urban properties intended exclusively for rental for permanent residential purposes" (a concept that was not even innovative), as well as to specify some circumstances in which the benefits of tax exemptions granted by the special regime cease. But it is worth noting that, in light of the special regime provided for in article 8, in its original wording, the essential condition was already expressly and unequivocally established for properties included in FIIAH and SIIAH to benefit from exemptions, and this was exactly the same as is currently found in the version introduced by the State Budget for 2014, namely, being intended for "rental for permanent residential purposes."
Any other purpose given to the properties in question, in particular their sale, already implied the cessation of the tax benefits resulting from the special regime. In other words, the introduction of the provisions described above only came to clarify some concepts, to introduce a time limit for FIIAH and SIIAH to conclude rental contracts for personal permanent residential purposes, already previously assumed as a condition for bringing into operation the tax benefits legally provided. But the solution of the specific case under discussion in the present case does not result from its retroactive application, but from the application of the regime that was already in force at the time of the granting of the tax benefits.
It is not apparent that from the introduction of these provisions results something truly innovative that alters or jeopardizes the legitimate expectations of these investment funds and investment companies, which were created specifically to solve a particular problem, related to the economic crisis that affected many families at risk of losing their home without any alternative solution. Therefore, the legislator created this special tax regime in 2008 (State Budget for 2009) to prevent social and economic losses that would harm families and credit institutions, the former by the dramatic loss of their right to housing and the latter by the impossibility of recovering their credits. Under the provisions introduced by the State Budget for 2014, it also follows that in the case of properties that are part of FIIAH and SIIAH not being subject to a rental contract within 3 years, counted from the date of their entry into the fund's assets, the exemptions provided for, under Property Tax (IMI), IMT and Stamp Duty, expire (become ineffective) and constitute the taxpayer in the obligation to request from the TA the assessment of the respective tax, within 30 days following the end of that period. Whereupon it also follows that, if the properties are sold before three years, they are mandatorily subject to the taxes due.
The only circumstance in which this will not occur is, precisely, that which is and has always been (since 2008) provided for in the law as a condition for exemptions: the properties being subject to a rental contract for permanent residential purposes, or sold as a consequence of performance of this rental contract with purchase option, exercised by the respective tenant.
22. In the specific case at hand, the Claimant seeks the annulment of the assessments on the grounds of unconstitutionality resulting from the retroactive application of the provisions introduced by the State Budget of 2014, incurring in a manifest misunderstanding, as the reason that determined the necessary issuance of the assessments was solely and exclusively the fact of having given another purpose to the property, different from that which it declared and which allowed it to benefit from the exemptions from IMT and Stamp Duty.
Well, being true that the State Budget for 2014 came to introduce the above-mentioned provisions with the innovations already mentioned, it does not seem that the reason underlying the disputed assessments results from the application of any of the provisions now introduced, but rather from the fact of having been given to the property another purpose, different from that provided for in the law since its original version. The fact is that the exemptions established in this special regime required, since their introduction in 2008, that the acquisition of the properties have as their exclusive purpose rental for permanent residential purposes and that the transfer have as its object properties intended for permanent residential purposes. Since its original version, taxpayers who wish to benefit from these exemptions must comply with the legal prerequisite: that the properties be intended exclusively for rental for permanent residential purposes.
It is proven by the documentary evidence submitted, namely from the assessment notes attached to the arbitral petition, that the disputed assessments were based on the fact of the property having been sold, therefore, its purpose from then on would cease to be what the law provides as a condition for the exemptions granted. Therefore, the assessments in question do not result from any requirement or prerequisite inserted anew by the State Budget for 2014, but rather from the non-allocation of the property to the purpose specifically provided for in the law as a potentiator of the tax exemptions established.
The Claimant has always known that this was the legal condition to comply with in order to benefit from the exemptions. Since the entry into force of the legal regime in question, it was clear that the decision to sell or give any other purpose to the property, instead of allocating it to the specific purpose of rental for permanent residential purposes, would have as a consequence the expiry of the exemptions from IMT and Stamp Duty provided for in article 8, no. 7, subparagraph b), no. 8 and article 5, no. 3 of the special regime of FIIAH. The sale, whether by exchange, purchase and sale or any other legal transaction different from that which results from the exercise of the purchase option right arising from the rental contract for personal permanent residential purposes (the only situation capable of benefiting from the exemptions provided), would always be subject to taxation under IMT and Stamp Duty.
23. Finally, let it be said that the tax benefits that the legislator provides, when it deems that weighty reasons justify it, prevent taxation, but always conditioned to the verification of legal requirements, under penalty of manifest violation of the principle of tax equality, among others. The fact that we are dealing with taxes of single obligation does not prevent this from being so. They are by nature exceptional and by preventing taxation that would normally be levied on the tax facts in question, they must be well considered and regulated in detail and with balance, under penalty of allowing abusive use contrary to the extrafiscal purpose they aim to achieve. Therefore, the legislator never grants tax benefits without imposing conditions or prerequisites to which the taxpayer is bound, under penalty of being subject to the normal taxation provided.
Because they constitute derogations to the general rules of taxation provided for in the law, tax benefits naturally raise questions of compliance with the imperatives arising from the principles of ability to pay and equality. Their supporting foundation is, in any case, the social, economic or other purpose it aims to achieve. For this very reason, it is never unconditional or granted without definition of well-defined factual and legal prerequisites, from which the tax benefit can be recognized.
As Benjamin da Silva Rodrigues states in this regard, notwithstanding that they are "measures of an exceptional character instituted for the protection of relevant public extrafiscal interests superior to those of taxation that they prevent", the aforementioned tax benefits paralyze, to some extent, the legal potentiality of the tax fact. "[1]
In this sense, according to Alberto Xavier, "exemptions can further be distinguished into pure and conditional, the latter being those in which the effectiveness of the preventive fact is subordinate to the realization of an accessory fact which is a 'conditio iuris' (…) conditioned benefits are expressed in subordinating the right to the benefit to counterparts of public interest in the form of duties or burdens imposed on the beneficiaries." [2]
Therefore, the legislator does not grant tax benefits without imposing requirements or prerequisites and conditions, to which the taxpayer is bound, under penalty of being subject to the normal taxation provided.
In the case of the legal regime under analysis, we are dealing with a conditioned tax benefit, that is, the benefit depends on the verification of certain prerequisites provided for in the law.
Because they constitute derogations to the general rules of taxation provided for in the law, tax benefits naturally raise questions of compliance with the imperatives arising from the principles of ability to pay and equality, which is why they must be considered in accordance with the purposes to be safeguarded. Their supporting foundation is the social, economic or other purpose it aims to achieve. For this very reason, it is never unconditional or granted without definition of well-defined factual and legal prerequisites.
Therefore, should those prerequisites not be met, the tax benefit cannot operate, whether it is automatic benefits or dependent on recognition. As results from the provision of article 12 of the Tax Benefits Statute (EBF), "the right to tax benefits must be reported to the date of verification of the respective prerequisites, even if it is dependent on recognition". From this it is inferred that the rule is that the right to tax benefits is constituted with the verification of the respective prerequisites provided for in the law.
Moreover, in reinforcement of this understanding, article 5 of the Tax Benefits Statute provides that tax benefits can be "automatic and dependent on recognition", the former being the result direct and immediate of the law, while the latter presuppose one or more subsequent acts of recognition. To all this is added the fact that pursuant to article 65 of the Code of Tax Procedure and Process (CPPT), "the recognition of tax benefits depends on the initiative of the interested parties, by means of a request addressed specifically to this end, the calculation, when mandatory, of the requested benefit and proof of the verification of the prerequisites of recognition in accordance with the law".
For the case under analysis in the present case, it is particularly relevant the last part of this legal provision, given that the right to the tax benefits in question depends exclusively on proof of the verification of the prerequisites provided for in the law.
Finally, pursuant to article 7 of the Tax Benefits Statute, "all persons, singular or collective, of public or private law, to whom tax benefits are granted, automatic or dependent on recognition, are subject to inspection by the Tax and Customs Authority."
24. In summary, it is concluded that the State Budget for 2014 effectively came to clarify and establish a new condition to the legal prerequisite already previously provided for the right to exemption, namely: should the allocation to rental for permanent residential purposes not occur within 3 years after the property enters the fund, the fund must request the assessment of the IMT that was not assessed ab initio. However, it was not the application of this deadline, introduced in the version of the State Budget for 2014, that originated the disputed assessments. These were a consequence derived from the fact of having been given a purpose to the urban property in question other than that which, since the introduction into the legal order of this special tax regime (2008), was required as a prerequisite for the right to exemption from IMT and Stamp Duty.
Therefore, despite proper consideration of the legal opinions expressed and developed in the legal opinion attached to the arbitral petition, the fact is that this focuses on the analysis of the unconstitutionality of the provision of article 236, when applied to cases constituted before its entry into force.[3] All the praise that may be recognized in the opinion attached, does not permit us to reach a different conclusion from the one stated, as even if we admit that the application of the provision of article 236 of the State Budget for 2014 involves a degree of retroactivity in its application possibly incompatible with the provision of article 103 of the Constitution, still, this thesis in no way would modify the correct decision of the present case. The disputed assessments were not generated as a consequence of the application of that provision, nor does the new regime established have any causal relationship with the reason for the assessments in question, and the provisions introduced do not alter the requirements for exemption established by the special tax regime applicable to SIIAH and FIIAH, in force as of 01-01-2009.
As is proven by the content of the disputed assessments, the property was sold and it was for this reason that the tax benefit expired, due to non-compliance with the prerequisite for the right to exemption.
In this light, this Court finds that the assessments of Municipal Transfer Tax and Stamp Duty, disputed in the present case, appear to be legal, as they are in accordance with the provision of article 8, no. 7, subparagraph a) of the legal regime of FIIAH.
Supporting this understanding is the abundant arbitral jurisprudence on this matter, including, among others, those handed down in cases nos. 689/2015-T; 705/2015-T, 717/2015-T, 63/2016-T, 93/2016-T.
In these terms, the present arbitral claim is considered to be without merit, and all claims formulated, whether for nullity or annulment, as well as the request for reimbursement of the total amounts paid and compensatory interest.
V - DECISION
In these terms, it is decided:
a) To judge the arbitral claim filed to be wholly without merit and, consequently, to uphold the disputed tax acts and to absolve the Respondent of all claims filed;
b) To condemn the Claimant to the payment of procedural costs, in the amount of €918.00.
VALUE OF THE CASE
The value of the case is set at €10,513.16 in accordance with article 97-A, no. 1, a), of the Code of Tax Procedure and Process (CPPT), applicable by virtue of subparagraphs a) and b) of no. 1 of article 29 of the RJAT and of no. 2 of article 3 of the Regulation of Costs in Tax Arbitration Proceedings.
COSTS
The arbitration fee is set at €918.00 in accordance with Table I of the Regulation of Costs in Tax Arbitration Proceedings, to be paid by the Claimant, in accordance with articles 12, no. 2, and 22, no. 4, both of the RJAT, and article 4, no. 4, of the aforementioned Regulation.
Notify.
Lisbon, June 26, 2017
The Single Arbitral Tribunal,
___________________________________
(Maria do Rosário Anjos)
[1] Cf. Benjamin da Silva Rodrigues, in Guarantees of Taxpayers in the Tax System, Homage to Diogo Leite de Campos, Saraiva Publishers, 2013, S. Paulo, Brazil, pp. 55 et seq.
[2] Cf. Alberto Xavier, in Manual of Tax Law, FDL Manuals, 1974, pp. 290 et seq.
[3] Legal Opinion issued by Professors C… and D…, submitted by the Claimant to the case file, attached to the arbitral petition.
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