Process: 51/2017-T

Date: June 8, 2017

Tax Type: IMT Selo

Source: Original CAAD Decision

Summary

CAAD arbitral decision 51/2017-T addresses whether IMT and Stamp Duty exemptions for real estate investment funds (FIIAH) can be retroactively revoked. A real estate fund acquired properties before 2014 with recognized tax exemptions under the original FIIAH regime. Law 83-C/2013 introduced Article 236, applying new expiry rules (3-year rental deadline) to properties already acquired. The fund challenged subsequent tax assessments, arguing the transitional rule violated Article 103(3) of the Portuguese Constitution by retroactively imposing conditions on crystallized exemptions. The claimant contended that IMT is a single-obligation tax where exemptions become permanent upon property acquisition, and no expiry conditions existed when exemptions were originally granted. The fund sought nullity (or subsidiarily voidability) of the assessments plus reimbursement with compensatory interest. The Tax Authority raised preliminary objections regarding material jurisdiction and passive legitimacy. This case examines fundamental constitutional limits on retroactive tax legislation, the permanence of recognized tax exemptions, and whether transitional rules can impose new obligations on completed tax facts without violating taxpayer protection principles enshrined in Portuguese constitutional law.

Full Decision

Arbitral Decision

I – Report

1.1. A…, S.A., with registered office at …, no. …–…, …-… Lisbon (hereinafter referred to as the "Claimant") – in its capacity as manager of the real estate investment fund "B… – Closed Real Estate Investment Fund for Residential Rental" ("B…"), registered with the Securities Commission, with tax number…–, in light of the IMT levy no. … and the CIT levy no. …, filed on 16/1/2017, a request for constitution of an arbitral tribunal and arbitral decision, under the terms of Article 2, no. 1, subsection a), of Decree-Law no. 10/2011, of 20/1 (Legal Framework for Arbitration in Tax Matters, hereinafter referred to as "LFATM"), in which the Tax and Customs Authority (TCA) is requested, seeking that it be "declared the nullity [or, if not so understood, the voidability] of the [aforementioned] levies, based on the [...] unconstitutionality" of "Article 236 (Transitional Rule within the Scope of the Special Regime Applicable to FIIAH and SIIAH) provided for by Law no. 83-C/2013, of 31 December – insofar as it determines the application of the current Tax Regime of FIIAH 'to properties that have been acquired by FIIAH before 1 January 2014, with the three-year period provided for in no. 14 being counted from 1 January 2014' – constitutes a new regime of expiry of the exemptions provided for in no. 7, subsection 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, enshrined in Article 103 (Tax System), no. 3, of the Constitution of the Portuguese Republic". The Claimant further considers that it should be reimbursed "for the full amount paid under the Levies that are the subject of this request for arbitral decision, increased, under the terms of Article 43 (Unduly Paid Tax Liability) of the General Tax Law, by the indemnity interest that is owed up to the date of such reimbursement."

1.2. On 21/3/2017 the present Sole Arbitral Tribunal was constituted.

1.3. Under the terms of Article 17, no. 1, of the LFATM, the TCA was summoned, as defendant party, to submit a reply, under the terms of the aforementioned article. The TCA submitted its reply on 27/4/2017, arguing for the total lack of merit of the Claimant's claim. In the aforementioned reply, it also raised a dilatory plea of lack of material jurisdiction and a dilatory plea of lack of passive legitimation.

1.4. The Claimant, having been notified of the TCA's reply, responded in writing to the pleas raised, in a motion of 30/5/2017, which was notified to the Defendant.

1.5. Given that the Claimant responded to the aforementioned pleas, the present Tribunal considered, under Article 16, subsection c), of the LFATM, that the hearing provided for in Article 18 of the LFATM was unnecessary and that the proceedings continue to decision. By order of 1/6/2017, the date of 8/6/2017 was set for the pronouncement of the arbitral decision.

1.5. The Arbitral Tribunal was regularly constituted, is materially competent, the proceedings do not suffer from defects that invalidate it, and the Parties have legal personality and capacity, being properly constituted.

II – Allegations of the Parties

2.1. The present Claimant alleges, in its initial petition, that: a) "the levies [at issue] suffer from illegality by violation of the provisions of Article 103 (Tax System), no. 3, of the Constitution of the Portuguese Republic and should, consequently, be declared null"; b) "IMT is a tax of single obligation [...]. This qualification is relevant here insofar as the IMT and CIT exemptions, contained, respectively, in nos. 7, subsection a), and 8 of Article 8 (Tax regime) of the Tax Regime of FIIAH, were recognised at the request of B…, under the terms of Article 10 (Recognition of exemptions) of the IMT Code, at a moment prior to the entry of the relevant properties into the patrimony of B… . That is, at the moment when the properties – object of the Levies – entered the patrimony of B…, the IMT and CIT exemptions provided for, respectively, in nos. 7, subsection a), and 8 of Article 8 (Tax regime) of the Tax Regime of FIIAH became permanently crystallized in the tax legal order"; c) "in effect, the fact subject to taxation is, both in the context of IMT and in the context of CIT, the acquisition of ownership of the relevant properties by B… . And the IMT and CIT exemptions were not, at the date when they entered the patrimony of B…, conditioned upon the subsequent verification of any facts or circumstances nor, likewise, subject to any regime of expiry"; d) "not being [...] legally provided for, at the moment of recognition of the exemption, any facts or circumstances upon which the expiry of the recognised exemption depended, it is manifest that the subsequent imposition of those facts or circumstances upon exemptions crystallized in the tax legal order of the Claimant suffers from unconstitutionality, by violation of the principle of non-retroactivity of tax law, enshrined in Article 103 (Tax System), no. 3, of the Constitution of the Portuguese Republic"; e) "Article 236 (Transitional Rule within the Scope of the Special Regime Applicable to FIIAH and SIIAH) of Law no. 83-C/2013, of 31 December [...], in extending the application of the current Tax Regime of FIIAH 'to properties that have been acquired by FIIAH before 1 January 2014, with the three-year period provided for in no. 14 being counted from 1 January 2014' – is violating in a direct and unequivocal manner the principle of non-retroactivity of tax law constitutionally enshrined. In effect, the extension enshrined therein constitutes a new regime of expiry of the exemptions provided for in nos. 7, subsection a) and 8 (Tax Regime) and not a mere concretisation of a criterion previously foreseen"; f) "in the case sub judice there are no doubts whatsoever that the tax facts that the new law intends to regulate have already produced all their effects under the old law"; g) "it should be clarified here whether the unconstitutionality now alleged by the Claimant should have as a consequence the voidability or the nullity of the Levies [...]. [...]. Considering that the principle of fiscal non-retroactivity bears the character of a fundamental right, endowed with the legal regime protective of this right, its disrespect gives rise to the nullity of the act, in casu, the nullity of the Levies"; h) "the admissibility of challenging the defect of nullity without dependence on a time period does not exclude the jurisdiction of the Arbitral Tax Tribunal, in particular, by literal interpretation of Article 10 (Request for constitution of the arbitral tribunal) of the LFATM. In effect, the cited Article 10 (request for constitution of the arbitral tribunal) of the LFATM should not be interpreted in the sense of being exclusively applicable to situations where acts whose challenge is subject to a time period are at issue"; i) "without conceding and merely as a precautionary measure, admitting, subsidiarily, that the defect (abstract illegality) of the Levies determines their voidability (and not their nullity), the Levies should be voided in conformity, under the terms of Articles 10, no. 1, subsection a), of the LFATM and of Article 102, no. 1, subsection a), of the Code of Tax Procedure and Process."

2.2. By the foregoing, the present Claimant seeks, in summary: "(I) [that] the nullity of the Levies be declared based on their unconstitutionality (abstract illegality); subsidiarily, if not so understood, the Levies should be voided"; "(II) be reimbursed [...] for the full amount paid under the Levies that are the subject of this request for arbitral decision, increased, under the terms of Article 43 (Unduly Paid Tax Liability) of the General Tax Law, by the indemnity interest that is owed up to the date of such reimbursement."

2.3. For its part, the TCA alleges, in its defense, that: a) "[the] Claimant alleges [...] that the levies suffer from abstract illegality [...]. However, if this thesis of the Claimant were accepted, then the Arbitral Tribunal would be materially incompetent to assess, in the abstract, the constitutionality of the norm in question, as petitioned"; b) "if the issue in the present case is not a situation of possible non-application of a norm due to any illegality occurring in its application to concrete facts, as the Claimant now argues, but rather its own (intrinsic) illegality/unconstitutionality, then it is important to conclude that the Arbitral Tribunal has no jurisdiction to assess this issue, given that what is sought is abstract review of the constitutionality of norms, a matter constitutionally reserved to the Constitutional Court, under the terms of subsection a) of no. 2, of Article 281 of the CRP. [...]. Thus, [...], it should be concluded that it is impossible for the present Arbitral Tribunal to decide the present dispute, insofar as the dilatory plea of lack of material jurisdiction is verified, from which follows the absolution of the Defendant from the claim, under the terms of the combined provisions of Articles 278, no. 1, subsection a) and 576, nos. 1 and 2 of the CPC, applicable ex vi Article 29, no. 1, subsection e) of the LFATM"; c) "being at issue a normative act emanating from the Assembly of the Republic in the typical form of a legislative act, the Tribunal should always declare the absolution of the Defendant from the claim, bearing in mind the dilatory plea of lack of passive legitimation demonstrated in the present arbitral proceedings, under the terms of Articles 278, no. 1, subsection d) and 576, nos. 1 and 2 of the CPC, applicable ex vi Article 29, no. 1, subsection e) of the LFATM"; d) "[the] Claimant argues that the TCA should not have proceeded with the levies sub judice, as such tax acts are based on Article 236 of the Tax Regime of FIIAH, which allegedly suffers from unconstitutionality by violation of the principle of non-retroactivity of tax law, under the terms of Article 103, no. 3 of the CRP. However, and without prejudice to what is developed below regarding the non-existence of the unconstitutionality defect alleged by the Claimant, it must be stated here from the outset that the action of the TCA, contrary to what the Claimant intends, could not have been different"; e) "under the terms of no. 2 of Article 266 of the CRP, the Administration is obliged to act in accordance with the principle of legality, such principle being concretised at the infra-constitutional level in no. 1 of Article 3 of the Code of Administrative Procedure (CAP) [...]. That is, from such legal impositions it follows that administrative bodies and agents do not have competence to decide on the non-application of norms regarding which doubts about constitutionality are raised"; f) "from the foregoing it results that the Administration is subject to the law and the law, and its bodies and agents must be the first to comply with it; being unable, therefore, to be required to pronounce on the options of the legislator, as these, once embodied in law, are the normative discipline within which it exercises its attributions in pursuit of the public interest"; g) "in summary, the TCA could not/cannot refuse the application of a norm or fail to comply with the law by invoking or questioning its constitutionality, as it is subject to the principle of legality, as laid down in Articles 266, no. 2 of the CRP, 3, no. 1 of the CAP and 55 of the GTL"; h) "Article 102 of Law no. 64-A/2008, of 31 December (State Budget for 2009), approved a special regime applicable to real estate investment funds for residential rental (FIIAH) and real estate investment companies for residential rental (SIIAH). The regime foreseen therein would apply to FIIAH or SIIAH constituted during the five years following the entry into force of the aforementioned law and to real estate acquired by them in the same period. Regarding the tax regime specifically foreseen therein, it is relevant for present purposes to note the provision in Article 8, no. 7, subsection a), relating to the IMT exemption and Article 8, no. 8, relating to the Stamp Duty exemption"; i) "under the terms of Article 8, no. 7, subsection a), the following are exempt from IMT 'The acquisitions of urban properties or autonomous fractions of urban properties intended exclusively for rental for permanent housing, by the investment funds referred to in no. 1'. Such exemption applying, by force of the provision in no. 1, to FIIAH constituted between 1 January 2009 and 31 December 2013, which operate in accordance with national legislation and with observance of the conditions provided for in Articles 1 to 7 of their respective legal framework. For its part, under the terms of Article 8, no. 8, 'The following are exempt from stamp duty all acts performed, provided they are connected with the transmission of urban properties intended for permanent housing that occurs by force of the conversion of the right of ownership of such properties into a right of rental over them, as well as with the exercise of the purchase option provided for in no. 3 of Article 5'"; j) "Law no. 83-C/2013, of 31 December (State Budget for 2014), gave new wording to the aforementioned Article 8, relating to the tax regime applicable to FIIAH, adding, in particular, nos. 14 to 16 [...]. Moreover, Law no. 83-C/2013, of 31 December also enshrined, in its Article 236, the following transitional rule [...]"; l) "in effect, no. 14 of Article 8 of the Tax Regime of FIIAH served to clarify the meaning of the expression 'urban properties intended exclusively for rental for permanent housing', as, under the terms provided therein, 'it is considered that urban properties are intended for rental for permanent housing whenever they are subject to a rental contract for permanent housing within the period of three years counted from the moment they became part of the fund's patrimony'. Along with such clarification, with the introduction of nos. 15 and 16 in the aforementioned Article 8, a regime of termination of the benefit was foreseen in the event the legal requirement contained in no. 14 was not observed"; m) "[the ora] Claimant argues that the levies in question suffer from illegality by violation of the provisions of Article 103 (Tax System), no. 3, of the CRP, and should, as a consequence, be declared null. [...]. However, as will be better demonstrated, the arguments of the Claimant are manifestly lacking in merit"; n) "even if the defect imputed to the levies in question existed, it would never generate nullity, but only voidability. It is, however, important to note that, whether the learned Tribunal subsumes the alleged defect under the concept of nullity or voidability, the truth is that, in any case, the claim is manifestly lacking in merit, as is better explained below"; o) "firstly, it must be noted that, at the date of creation of the tax regime applicable to FIIAH, with Law no. 64-A/2008, of 31 December, the exemptions in question, both in the context of IMT and in the context of Stamp Duty, required, respectively: (i) that the acquisition of the properties had as exclusive destination 'rental for permanent housing' and (ii) that the transmission had as object 'properties intended for permanent housing that occurs by force of the conversion of the right of ownership of such properties into a right of rental over them, as well as with the exercise of the purchase option provided for in no. 3 of Article 5'." That is, taxpayers who wished to benefit from the aforementioned exemptions, always had, from the beginning of the regime applicable to FIIAH, to comply with the requirement that such properties be intended exclusively for rental for permanent housing. Therefore, the Claimant lacks reason when it states that the exemptions in question were not conditioned by any facts or circumstances, and, consequently, the argument that it constructs based on such erroneous premise is likewise affected by error. [...] the new wording introduced by Law no. 83-C/2013, of 31 December, in favour of legal certainty and the principle of protection of legitimate expectations, and in line with the spirit of the legislator, when creating the regime, served only to clarify the criterion already required"; p) "it is to be concluded, thus, that, with the amendments introduced, the ratio of the enshrined exemptions was not altered, and it should be underlined that the immediate extinction of the benefit was not determined in the event that the aforementioned rental contract was not executed, as a fairly broad period, (of three years), was granted for that purpose"; q) "bearing in mind the alienation of the properties in 2016, it results unequivocally that [the] Claimant could not, in any case, benefit from the requested exemption"; r) "the exemptions in question did not simply cease to apply: what happened, merely, was that criteria were established to clarify a legal requirement foreseen in an indeterminate manner"; s) "it is manifest that, from the beginning of the regime, the fiscal benefits in question applicable to FIIAH always depended on the dedication of the properties to rental for permanent housing, a legal requirement that the TCA, within the scope of its supervisory powers, would always be able to verify, in order to conclude on the permanence of the benefit or, rather, on the restoration of the rule system of taxation"; t) "contrary to what the Claimant argues, there is no introduction ex novum of a regime of expiry of the benefit, and even less is there any frustration of the expectations of taxpayers or violation of the principle of non-retroactivity of tax law"; u) "not being able to impute to the TCA services an error that, in itself, has determined the payment of a tax debt in an amount superior to that legally due - since it was not within their discretion to decide differently from the manner in which it decided - it can only be concluded that indemnity interest is not owed under the terms of Article 43 of the GTL."

2.4. The TCA concludes, finally, that: "(i) the dilatory plea of lack of material jurisdiction should be recognized as verified, from which follows the absolution of the Defendant from the claim, under the terms of the combined provisions of Articles 278, no. 1, subsection a) and 576, nos. 1 and 2 of the CPC, applicable ex vi Article 29, no. 1, subsection e) of the LFATM, or (ii) the Tribunal should declare the absolution of the Defendant from the claim, bearing in mind the dilatory plea of lack of passive legitimation demonstrated in the present arbitral proceedings, under the terms referred to above; or, if not so understood, (iii) the present request for arbitral decision should be judged as lacking in merit for not being proven and, consequently, the Defendant absolved of all claims, under the terms petitioned above, all with the due and legal consequences, or, if not so understood, (iv) it is requested, by appeal to the provision in Article 280, no. 3, of the CRP and in Article 72, no. 3, of the Law of the Constitutional Court, that the Public Prosecutor be notified of the learned arbitral decision."

III – Proven, Unproven Facts and Respective Grounds

3.1. The following facts are considered proven:

i) The present Claimant requested from the TCA the levy of IMT and CIT from the acts of alienation of properties by "B… ", as follows: property with cadastral article no. … (fraction "F"), of the parish of …, municipality of Cascais; IMT levy no. … and CIT levy no. …, in the amounts, respectively, of €5810.63 and €1597.00 (which, added together, correspond to the amount here in issue: €7407.63) – v. Doc. 1 attached to the present proceedings.

ii) The property in question was acquired on 18/12/2013, benefiting from the IMT and CIT exemptions contained, respectively, in no. 7, subsection a), and no. 8 of Article 8 of the special regime applicable to FIIAH, having been alienated in November 2016.

iii) The levies referred to above were paid by the Claimant on 7/11/2016, as can be seen from the reading of Doc. 2 attached to the proceedings. Dissatisfied with the aforementioned levies, the Claimant filed its request for arbitral decision on 16/1/2017.

3.2. There are no facts unproven relevant to the decision of the case.

3.3. The facts considered pertinent and proven (v. 3.1) are grounded in the analysis of the positions exposed by the parties and the documentary evidence attached to the proceedings.

IV – On the Law

In the case under analysis here, there are two contested legal issues: 1) to know whether the IMT and CIT levies are illegal, because carried out under Article 236 of Law 83-C/2013, of 31/12, which the Claimant understands to be unconstitutional by violation of the provision in Article 103 of the CRP (and, further, null by alleged breach of the essential content of a fundamental right, under the terms of Article 133, no. 2, subsection d), of the CAP); and 2) to know whether indemnity interest is owed to the Claimant.

Let us then see.

  1. The present Claimant alleges that the levies in question are illegal because carried out under Article 236 of Law no. 83-C/2013, of 31/12 (State Budget Law 2014) – an article that the Claimant considers unconstitutional by violation of the aforementioned Article 103 of the CRP.

In its understanding, "Article 236 (Transitional Rule within the Scope of the Special Regime Applicable to FIIAH and SIIAH) of Law no. 83-C/2013, of 31 December (State Budget for 2014), in extending the application of the current Tax Regime of FIIAH 'to properties that have been acquired by FIIAH before 1 January 2014, with the three-year period provided for in no. 14 being counted from 1 January 2014' – is violating in a direct and unequivocal manner the principle of non-retroactivity of tax law constitutionally enshrined. In effect, the extension enshrined therein constitutes a new regime of expiry of the exemptions provided for in nos. 7, subsection a) and 8 (Tax Regime) and not a mere clarification of a criterion previously foreseen." By the foregoing, the present Claimant concludes that "in the case sub judice there are no doubts whatsoever that the tax facts that the new law intends to regulate have already produced all their effects under the old law".

However, it does not seem that this is the issue at hand here.

First of all, it is worth observing Law no. 64-A/2008, of 31/12, which approved the special regime applicable to FIIAH. In that regime, it was provided, in particular: in no. 7 of Article 8, that the following were exempt from IMT "the acquisitions of urban properties or autonomous fractions of urban properties intended exclusively for rental for permanent housing" by the aforementioned funds; and, in no. 8 of that same article, that the following were exempt from Stamp Duty "all acts performed, provided they are connected with the transmission of urban properties intended for permanent housing that occurs by force of the conversion of the right of ownership of such properties into a right of rental over them".

Law no. 83-C/2013, of 31/12, altered the wording of the aforementioned Article 8, adding nos. 14 to 16, which are reproduced here:

"14 - For the purposes of the provision in nos. 6 to 8 of the aforementioned Article 8, it is considered that 'urban properties are intended for rental for permanent housing whenever they are subject to a permanent housing rental contract within the period of three years counted from the moment they became part of the fund's patrimony, the taxpayer being required to communicate and provide proof to the TCA of the respective effective rental, within 30 days following the end of the aforementioned period.

15 - When the properties have not been subject to a rental contract within the three-year period provided for in the preceding number, the exemptions provided for in nos. 6 to 8 are without effect, the taxpayer being required in such case to request from the TCA, within 30 days following the end of the aforementioned period, the levy of the respective tax.

16 - If the properties are alienated, with the exception of cases provided for in Article 5, or if the FIIAH is subject to liquidation, before the period provided for in no. 14 has elapsed, the taxpayer must equally request from the TCA, before the alienation of the property or the liquidation of the FIIAH, the levy of the tax due under the terms of the preceding number."

In Article 236 of the aforementioned Law no. 83-C/2013, of 31/12, the following transitional rule was further enshrined:

"1 - The provision in 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 31 December, is applicable to properties that have been acquired by FIIAH from 1 January 2014.

2 - Notwithstanding the provision in the preceding number, the provision in 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 31 December, is equally applicable to properties that have been acquired by FIIAH before 1 January 2014, with the three-year period provided for in no. 14 being counted from 1 January 2014."

From this it is concluded that the aforementioned Law established a transitional period for application of the legal amendments, aiming at, according to what the Defendant states (v. §83 and 86 of the reply), "in favour of legal certainty and the principle of protection of legitimate expectations, and in line with the spirit of the legislator, when creating the regime, [...] only to clarify the criterion already required [...]. It being certain that, in any case, bearing in mind the alienation of the properties in 2016, it results unequivocally that the Claimant could not [...] benefit from the requested exemption."

To the same effect, the Arbitral Decision dated 14/3/2016, pronounced in Case 398/2015-T, notes that "the obligation to dedicate the property to residential rental is not a requirement of the amendments introduced by the State Budget for 2014, but rather a requirement of the FIIAH fiscal regime from the start, indeed a natural consequence of the motivations that led to the creation of these funds. However, this was not the case in the present case [...]. The IMT levies made [...] were not based on their maintenance in the fund for a period equal to or greater than 3 years without there having been dedication to rental for permanent housing. [...]."

In effect, as is also mentioned in the Arbitral Decision dated 22/4/2016, which was pronounced in Case 691/2015-T: "The State Budget for 2014 does, it is true, establish a new requirement for the exemption: if the dedication to rental for permanent housing does not occur within the 3-year period after the property enters the fund, the fund should request the levy of the IMT that was not levied. However, this was not the case in the present case [...]. The IMT and Stamp Duty levies in question were not based on their maintenance in the fund for a period equal to or greater than 3 years without there having been dedication to rental for permanent housing. [...]. In fact, the levies in question, as it appears from the levy notes attached to the proceedings, were based on the fact that a 'different destination than that on which the benefit was based' was given to the properties. Thus, we understand that what is at issue is not the retroactivity, or otherwise, of the norm applied".

In fact, it is demonstrated that the property here in question was alienated in 2016, with the consequent dedication of the same to a purpose different from that for which the exemptions were granted. This is not, therefore, a question of time period, as the present Claimant alleged.

In this regard, and as is also well noted in the Arbitral Decision dated 2/5/2016, pronounced in Case 689/2015-T, "the alienation of the property would always determine the expiry of the exemption by application of the provision in no. 3 of Article 14 of the Statute, there not being, therefore, at issue, in the situation sub judice, any retroactive application of a norm that comes to introduce a new regime of expiry of the exemptions, nor does there exist injury to the legitimate expectations of the Claimant or aggravation of their tax position, which is why we understand thus that the IMT and Stamp Duty levies in crisis are legal. Thus, the analysis of the issue raised by the Claimant as to the alleged retroactivity of the regime provided for in Article 236 of the State Budget Law for 2014 is therefore prejudiced insofar as, as was demonstrated above, the conditions that originated the tax levies in crisis in no way relate to the amendments originated by the aforementioned article, only to the alienation of the property and consequent dedication to a purpose different from that for which the IMT and Stamp Duty exemptions were granted."

For the reasons noted, with which agreement is found, it is concluded – also in the present case –, that the analysis of the alleged retroactivity issue of the regime contained in Article 236 is prejudiced, and that no unjustified injury to the legitimate expectations of the present Claimant or unjustified aggravation of their tax position occurred as a result of the levies in question. In these terms, it is concluded, consequently, that the IMT and CIT levies now in question should be maintained in full in the legal order.

It should be noted, further, and as a final note, that, in the present case, what would never be at issue is the (also alleged by the Claimant) nullity by breach of "essential content of a fundamental right" [v. §49 and §50 of the initial petition], since, as has been the consistent understanding of the case law of the SAC, the defect of violation of law by error in the legal presuppositions (which is what could be at issue here) generates mere voidability, unless the tax act violated the content of a fundamental right (a situation that is clearly not at issue here) – which does not occur even if there has been a violation of the principles of tax legality or non-retroactivity of tax law (see, in this regard and merely by way of example, the following Decisions of the SAC: no. 1709/03, of 28/1/2004; no. 1938/03, of 3/3/2004; no. 1259/04, of 22/5/2005; no. 669/05, of 9/11/2005; no. 612/05, of 23/11/2005; no. 231/13, of 26/6/2013; no. 481/13, of 26/2/2014; no. 1916/13, of 12/3/2014; no. 703/14, of 21/1/2015).

See, also, to the same effect, the following excerpt from the Decision of the CAC of 26/3/2015 (Case 00354/08.0BEPRT): "The Appellant alleges [...] that the tax in question is null by [...] breach of the essential content of a fundamental right. It follows from the provision in Article 133, nos. 1 and 2, subsection d), of the Code of Administrative Procedure applicable ex vi no. 2, subsection c), of the GTL, that null are the acts lacking any of the essential elements or for which the law expressly provides for such form of invalidity, in particular acts that breach the essential content of a fundamental right. The Appellant's argument does not prevail. Acts that breach a fundamental right must be those that contend with the rights, freedoms and guarantees of citizens; not those that contend only with the principle of legality, as is the case in the present proceedings. [...] it is consistent in the case law of tax litigation that the nullity of a norm on which a levy act is based does not imply the nullity of the latter, generating only a situation of abstract illegality of the levy [...] (cf. to that effect, among many others, the decisions of the SAC of 25/05/2004, Case no. 208/04, 9/11/2005, Case 669/05, 7.05.2008, Case no. 1034/07, of 5.07.2007, Case no. 479/06, of 16/09/2009, Case no. 0418/09, and of 23/10/2013, Case no. 0579/13). Thus, the tax act that applies [allegedly] unconstitutional norms [...] does not give rise to the nullity of the levy, but generates mere voidability, being a defect of violation of law by error in the legal presuppositions."

  1. Under the terms of Article 43, no. 1, of the GTL, indemnity interest is owed when it is ascertained, in a gracious complaint or judicial challenge, that there has been error attributable to the services from which results payment of the tax debt in an amount superior to that legally due.

It is, therefore, a necessary condition for the attribution of the aforementioned interest the demonstration of the existence of error attributable to the services. To that effect, v., for example, the following decision: "The right to indemnity interest provided for in no. 1 of Article 43 of the GTL [...] depends on it being demonstrated in the proceedings that that act is affected by error as to the facts or law presuppositions attributable to the TCA." (Decision of the SAC of 30/5/2012, Case 410/12).

Now, having not occurred, as it follows from what was said in 1), any error attributable to the services, it is concluded as to the lack of merit of the request for payment of indemnity interest to the Claimant.

V – DECISION

In light of the foregoing, it is decided:

– To judge the request for arbitral decision as lacking in merit, the levy acts now challenged being maintained in full in the legal order, and the requested entity being absolved accordingly from the claim.

– To judge the request as also lacking in merit in the part concerning the recognition of the right to indemnity interest in favour of the claimant.

The value of the case is set at €7407.63 (seven thousand four hundred and seven euros and sixty-three cents), under the terms of Article 32 of the CPTA and Article 97-A of the CPPT, applicable by force of the provision in Article 29, no. 1, subsections a) and b), of the LFATM, and of Article 3, no. 2, of the Regulation of Costs in Tax Arbitration Proceedings (RCPAT).

Costs to be borne by the Claimant, in the amount of €612.00 (six hundred and twelve euros), under the terms of Table I of the RCPAT, and in compliance with the provision in Articles 12, no. 2, and 22, no. 4, both of the LFATM, and with the provision in Article 4, no. 4, of the aforementioned Regulation.

Notify.

Lisbon, 8 June 2017.

The Arbitrator

(Miguel Patrício)

Text prepared by computer, in accordance with the provision in Article 131, no. 5, of the CPC, applicable by remission of Article 29, no. 1, subsection e), of the LFATM.

The wording of the present decision is governed by the spelling prior to the Orthographic Agreement of 1990.

Frequently Asked Questions

Automatically Created

Are real estate investment funds (FIIAH) exempt from IMT and Stamp Duty on property acquisitions in Portugal?
Yes, under the original FIIAH tax regime (before 2014), real estate investment funds enjoyed exemptions from IMT under Article 8(7)(a) and Stamp Duty under Article 8(8). These exemptions were recognized upon request before property acquisition and, according to the claimant, became permanently crystallized in the tax legal order at the moment properties entered the fund's patrimony, with no expiry conditions originally attached.
Does the transitional rule in Article 236 of Law 83-C/2013 violate the principle of non-retroactivity of tax law under the Portuguese Constitution?
The claimant argues Article 236 of Law 83-C/2013 is unconstitutional because it retroactively applies a new 3-year rental deadline to properties acquired before January 1, 2014, when no such condition existed. This allegedly violates Article 103(3) of the Portuguese Constitution, which enshrines the principle of non-retroactivity of tax law. The claimant contends this constitutes impermissible retroactive legislation affecting completed tax facts that had already produced all legal effects under the previous regime.
What happens to FIIAH tax exemptions when the three-year deadline for leasing acquired properties expires?
Under the transitional regime introduced by Law 83-C/2013, if FIIAH properties are not leased within three years (counted from January 1, 2014 for pre-2014 acquisitions), the previously granted IMT and Stamp Duty exemptions expire, triggering tax assessments. The claimant challenges this mechanism as an unconstitutional retroactive imposition of expiry conditions on exemptions that were originally recognized without any such contingencies or time limits.
Can taxpayers claim reimbursement and compensatory interest for unlawful IMT and Stamp Duty assessments paid to the Portuguese Tax Authority?
Yes, under Article 43 of the General Tax Law (LGT), taxpayers who pay taxes unduly are entitled to reimbursement of the full amount paid, increased by compensatory interest calculated from the payment date until actual reimbursement. In this case, the claimant specifically requested reimbursement of all amounts paid under the contested assessments plus accrued compensatory interest if the arbitral tribunal declares the levies null or voidable.
How does the CAAD arbitral tribunal handle preliminary objections of material incompetence and passive illegitimacy raised by the Tax Authority?
The CAAD arbitral tribunal follows the procedural framework in the RJAT (Legal Framework for Tax Arbitration). When the Tax Authority raises preliminary objections (such as material incompetence or passive illegitimacy), the claimant is notified and may respond in writing. Under Article 16(c) of RJAT, if written responses are submitted, the tribunal may dispense with the hearing provided in Article 18 and proceed directly to decision. The tribunal addresses these preliminary issues before examining the merits of the substantive tax dispute.