Summary
Full Decision
ARBITRAL DECISION
The arbitrators Dr. José Poças Falcão (arbitrator-chairman), Dr. Rui Rodrigues and Dr. Mariana Vargas (arbitrator-members), appointed by the Ethics Council of the Administrative Arbitration Centre to form the Arbitral Tribunal, constituted on 16 January 2019, agree as follows:
1 - Report
1.1 – "A... - Branch in Portugal", taxpayer no. ..., with registered office at Rua ..., no. ... – ... floor, in Lisbon, hereinafter referred to as "Claimant", a Portuguese branch of a civil property investment company with variable capital established under French law, following the formation of the presumption of tacit rejection of the ex officio review request submitted on 9 April 2018, requested the constitution of a collective arbitral tribunal, under the combined provisions of Article 2, paragraph 1, subparagraph a) and Article 10, both of Decree-Law no. 10/2011, of 20 January (Legal Regime for Arbitration in Tax Matters, hereinafter referred to as "LRAT") and Articles 1 and 2 of Ordinance no. 112-A/2011, of 22 March, in which the Tax and Customs Authority (hereinafter "Respondent" or "TA") is named as respondent.
1.2 - The request for arbitral decision, presented on 6 November 2018, has as its object the declaration of illegality and consequent annulment of the assessments of Municipal Tax on Onerous Property Transfers (IMT) nos. ... of 09 April 2014 and ... of 16-12-2014, in the amounts of €269,750.00 and €1,865,519.98, respectively.
1.3 - It further requests the condemnation of the "TA" to reimburse the amounts paid in respect of the aforementioned assessments, in the total amount of €2,135,269.98, plus the respective compensatory interest, under the terms of Articles 43, paragraph 1 of the General Tax Law (GTL) and 61 of the Tax Procedure and Process Code (TPPC), calculated from the date of the undue payment of the tax until the date of processing of the respective tax credit note.
1.4 - The Claimant chose not to appoint an arbitrator.
1.5 - The request for constitution of the arbitral tribunal was accepted by the President of the CAAC and notified to the TA on 12 November 2018.
1.6 - Pursuant to the provisions of subparagraph a) of paragraph 2 of Article 6 and subparagraph b) of paragraph 1 of Article 11 of the LRAT, in the wording introduced by Article 228 of Law no. 66-B/2012, of 31 December, the Ethics Council appointed as arbitrators of the collective arbitral tribunal the signatories, who communicated acceptance of the appointment within the applicable period.
1.7 - On 26 December 2018, the Parties were notified of that appointment and did not object to it, under the combined provisions of Article 11, paragraph 1, subparagraphs a) and b) of the LRAT and Articles 6 and 7 of the Ethics Code of the CAAC.
1.8 - Thus, in accordance with the provisions of Article 11, paragraph 1, subparagraph c), of the LRAT, the collective arbitral tribunal was constituted on 16 January 2019.
1.9 - The Respondent was notified, by arbitral order of 17 January 2019, pursuant to Article 17, paragraph 1 of the LRAT, to present, within a period of 30 days, its Answer, if it so wished, and to request the production of additional evidence.
1.10 - It was further notified to present, within the same period, the administrative file (AF) referred to in Article 111 of the TPPC.
1.11 - On 15 February 2019 the Respondent informed that it did not intend to present an Answer. However, it attached an administrative file composed of 142 pages, of which 100 correspond to AF-1 and the remainder to AF-2.
1.14 - Considering that the Parties did not request the production of any evidence other than the documents attached to the file, the Arbitral Tribunal, in light of the principles of autonomy in the conduct of the proceedings, expedition, simplification and procedural informality, contained in Articles 16 and 29, paragraph 2, of the LRAT, by order of 21 February 2019, dispensed with the holding of the meeting provided for in Article 18 of the same statute, and further decided that the proceedings would continue with optional written submissions, within a simultaneous period of 20 days.
1.15 - By the same order it was determined that the arbitral decision would be delivered by 6 May 2019.
1.16 – On 14 March 2019 the Claimant submitted its Submissions, concluding that the contested assessments were illegal, should be annulled, with the consequent reimbursement of the amounts unduly paid, plus compensatory interest under the terms of Articles 43 of the GTL and 61 of the Tax Procedure and Process Code.
1.17 – The Respondent chose not to present submissions.
Position of the Claimant -
It supports its request for arbitral decision, briefly, as follows:
It is an open real estate collective investment body, established in France in the form of a Société Civile de Placement Immobilier, and subject to the regime provided for in Articles 1832 et seq. of the French Civil Code and Articles L.214-50 to L.214-84 and R.214-116 to R.2014-143 of the French Monetary and Financial Code; as well as to the General Regime for Collective Investment Bodies enshrined in Law no. 16/2015, of 24 February.
That it engages in collective investment in real estate assets, through the contribution of various investors, in accordance with the investment policy defined by the respective investment company and in compliance with a principle of risk distribution.
Its activity is subject to authorization and supervision by the competent regulators (the Authorité des Marchés Financiers in France and the CMVM in Portugal).
It is managed by an investment fund management company, B..., registered in the Commercial and Companies Register of Paris under no. ..., authorized and subject to supervision by the AMF under no. GP-..., of 14 April 2011.
In this regard, the nature and regime applicable to the Claimant are in all respects identical to those of hetero-managed real estate investment companies with variable capital (SICAVI), regulated by Law no. 16/2015, of 24 February.
SICAVIs assume corporate form, in accordance with the provisions of Article 11 of Law no. 16/2015, of 24 February.
They are real estate collective investment bodies that "Have as their purpose the collective investment of capital obtained from investors, whose operation is subject to a principle of risk distribution and the pursuit of the exclusive interest of participants" [cf. Article 2, paragraph 1, subparagraph aa) of Law no. 16/2015, of 24 February];
They are subject to a regime of authorization and supervision by the CMVM [cf. Articles 19 et seq. of Law no. 16/2015, of 24 February]; and
They are managed by a third entity, subject to registration with the CMVM [cf. Articles 11, paragraph 3, 54 and 69 et seq. of Law no. 16/2015, of 24 February].
And the evident similarity between legal regimes (arising from the fact that Portuguese law and French law result from the transposition of Directive 2011/61/EU, of 8 June 2011) is, naturally, accompanied by identity between the economic function of the Claimant and that of Portuguese SICAVIs, which perform exactly the same role in the market, aggregating investment of the same nature under similar conditions.
Therefore, the Claimant is manifestly an entity comparable to national collective investment bodies and there is no formal or material justification for applying less favorable treatment to it, which is why it is inadmissible to consider that the exemption rule provided for in Article 1 of Decree-Law no. 1/87, of 3 January, does not apply to acquisitions made by the Claimant.
It emphasizes that the Arbitral Tribunal constituted by the CAAC is indisputably a court of law for the purposes of applying Article 267 of the TFEU [cf. Decision handed down by the CJEU on 12 June 2014 in case C-377/13 (Ascendi)] and, to that extent, is obliged to submit to the Court of Justice questions relating to the interpretation of European Union law whenever they are relevant for the determination of the case. This obligation is dispensed with only if the Arbitral Tribunal considers the regime manifestly clear [cf., for example, the Decision handed down on 6 October 1982 in Case C-283/81 (Cilfit)] or the matter has already been dealt with by the CJEU in a case concerning a similar question [cf., for example, the Decision handed down on 9 September 2015, in case C-160/14 (João Filipe Ferreira da Silva e Brito)].
In these terms, if in the hypothesis – which is not upheld – of not considering it clear that, as interpreted in the aforementioned Decisions, that European Union law is opposed to the non-application of the exemption rule contained in Article 1 of Decree-Law no. 1/87, of 3 January, to the acquisitions in question in this request, the Arbitral Tribunal is "obliged to submit that question to the Court of Justice, by making a preliminary reference to it.
The Claimant reiterates that the exemption enshrined in Article 1 of Decree-Law no. 1/87, of 3 January, applies uniformly to all investment funds, whether of a contractual or corporate nature, which is why the fact that the Claimant is a branch of a real estate investment company, also cannot, in any case, justify the non-application of the regime to the acquisitions in question in this proceeding.
In the course of its activity, the Claimant acquired various properties described in Articles 4 and 10 of the ara, cf. deeds of purchase and sale executed on 9 April 2014 and 16 December 2014 (documents nos. 11 and 12, respectively), and bore the IMT, in the total amount of €2,135,269.98, assessed by the Tax and Customs Authority.
However, these acquisitions are exempt from IMT pursuant to Article 1 of Decree-Law no. 1/87, of 3 January, combined with paragraph 6 of Article 31 of Decree-Law no. 287/2003, of 12 November, which statute, as of the date of the aforementioned taxable events, that is, as of the date of transfer of the aforementioned properties, was in force.
This being the interpretation uniformly adopted in the following Arbitral Decisions delivered on this matter: Case no. 544/2016, of 28-04-2017; 677/2016, of 20-06-2017; 440/2017, of 15-01-2018; 547/2017, of 15-03-2018; 580/2017, of 09-03-2018; 622/2017, of 24-05-2018; and 188/2018, of 20-09-2018.
It ends by arguing for the merits of the request for arbitral decision and thereby for the annulment of the contested assessments with all the consequences provided for by law, namely the reimbursement of the amounts unduly paid, plus the corresponding compensatory interest.
2 - Preliminary Issues
2.1 – The request for arbitral decision was presented following the formation of tacit rejection of the review request under Article 78 of the General Tax Law (GTL), sent on 9 April 2018, through postal services (registration no. RH ... PT), to the Tax and Customs Authority, more specifically to the Department of Services of the Municipal Tax on Onerous Property Transfers, Stamp Tax, Single Circulation Tax and Special Contributions, cf. document no. 1 attached to the ara (subparagraph n) of the evidence below).
In this regard, it is absolutely necessary to assess the timeliness of the same.
Indeed, Article 78, paragraph 1 of the GTL states: "The review of tax acts by the entity that issued them may be carried out at the initiative of the taxpayer, within the period for administrative complaint and on the ground of any illegality, or, at the initiative of the tax authority, within four years following the assessment or at any time if the tax has not yet been paid, on the ground of error attributable to the services".
The assessment contained in document no. ..., in the amount of €269,750.00, was made on 9 April 2014 and payment occurred the next day, cf. documents nos. 2 and 10, respectively (subparagraphs g) and h) of the evidence). On the other hand, the assessment contained in document no. ..., in the amount of €1,865,519.98, was made on 16 December 2014 and paid on the same date, cf. document no. 3 (subparagraphs k) and l)).
Thus the review of the tax assessment acts should occur, if carried out at the initiative of the Claimant, within the period for administrative complaint and on the ground of any illegality, or within four years following the assessment, if carried out at the initiative of the tax authority.
However, it has been understood by the case law that the review of the tax act at the initiative of the tax authority may be carried out at the request of the taxpayer, as results from Article 78, paragraph 7, of the GTL and Article 86, paragraph 4, subparagraph a), of the TPPC, within four years from the assessment (or, if the tax has not been paid, at any time), thereby vesting the taxpayer with a right to a decision on the request made. And "error attributable to the services" to which Article 78, paragraph 1, at the end, of the GTL refers, includes not only mistake, material error or error of fact, but also error of law, and this attributability to the services is independent of the demonstration of fault of the officials involved in issuing the assessment affected by the error. - - -
In the same sense Jorge Lopes de Sousa and others when they state: "(…) In any case, the duty of the Administration to carry out the review of tax acts, in favor of the taxpayer, when it detects such a situation by its own initiative or by the taxpayer's, exists in relation to all taxes, since the principles of justice, equality and legality, which the tax authority must observe in all of its activity (Article 266, paragraph 2 of the Constitution and 55 of the GTL), require that all errors in assessments leading to the collection of tax in an amount higher than what would be due under the law be officially corrected (…). Thus, it is to be concluded that the fact that the period for administrative complaint and judicial impugnation of the assessment act has elapsed does not prevent the taxpayer from requesting the ex officio review and contesting the act of rejection of this in court".
In this manner, considering that the contested assessments were made on 09-04-2014 and 16-12-2014 and that the review request was sent to the competent entity on 09-04-2018, it must be concluded that it is timely, since the four-year period referred to in paragraph 1 of Article 78 of the GTL was not exceeded, cf. the provision of subparagraph c) of Article 279 of the Civil Code.
Therefore, pursuant to paragraph 1 of Article 57 of the GTL, the aforementioned review request should have been decided within four months from that date (09-04-2018), that is, by 09-08-2018, whose failure to comply after that date presumes tacit rejection for the purposes of hierarchical appeal, contentious appeal or judicial impugnation, cf. paragraph 5 of that article.
As explained by the Honorable Counselor Jorge Lopes de Sousa, "Tacit rejection is a legal fiction intended to enable the interested party to access the courts to obtain protection for its rights or legitimate interests, in cases of inertia of the tax authority regarding claims presented to it".
Resulting from "inertia of the tax authority regarding claims presented to it", by the failure to render a decision on such claims within the period legally conferred upon it for such purpose.
That is, and in summary, the presumption of tacit rejection arises from the violation of the legal duty to decide that is incumbent upon the TA.
As Diogo Leite de Campos, Benjamim Silva Rodrigues and Jorge Lopes de Sousa write, "The creation of a legal duty to decide has the purpose of enabling the formation of a tacit act of rejection, which depends on the existence of such duty, and the provision for the formation of an act of this type has as its only possible justification enabling its contentious impugnation".
Thus, by virtue of the provisions of paragraphs 1 and 5 of Article 57 of the GTL the review request of the tax assessment acts is presumed to be tacitly rejected for the purpose of judicial impugnation on 10 August 2018, therefore, pursuant to subparagraph a) of paragraph 1 of Article 10 of the LRAT, combined with subparagraph d) of paragraph 1 of Article 102 of the TPPC, the request for constitution of an arbitral tribunal could be presented by 10 November 2018, that is, within the period of 90 days counted from the date of formation of the presumption of tacit rejection of the review request of the tax assessment acts.
Therefore, since the request for constitution of the arbitral tribunal was presented on 6 November 2018, it is manifestly timely.
2.2 - The Parties have legal capacity and judicial capacity, are duly interested and are regularly represented (Articles 4 and 10, paragraph 2, of the LRAT and Article 1 of Ordinance no. 112-A/2011, of 22 March).
2.3 - The proceeding is not affected by any nullities and no exceptions were raised.
2.4 - The Arbitral Tribunal is regularly constituted and is materially competent to know and decide the request, cf. Article 2, paragraph 1, subparagraph a) of the LRAT.
2.5 - There are no other circumstances that prevent the examination of the merits of the case.
3. Matters of Fact
3.1 Proven Facts
With relevance to the appreciation and decision of the questions raised, the following facts are given as established and proven:
a) The Claimant has the legal nature of "Permanent Representation", with the corporate purpose being the acquisition and management of real estate assets located in Portugal and, in general terms, the development of the activity of the company in Portugal. It is the representative of the company "C...", of French nationality, with registered office in ... Paris, whose purpose is the acquisition and management of real estate assets for rental in France and in the Euro Zone, cf. online publication of the constitution of the branch, which constitutes document no. 4 attached to the ara.
b) The represented company has the legal form of "Civil property investment company with variable capital", has been registered since 28-02-2012, and is subject to the regime provided for in Articles 1832 et seq. of the French Civil Code and Articles L.214-50 to L.214-84 and R.214-116 to R.2014-143 of the French Monetary and Financial Code; as well as – insofar as it develops its activity in Portugal – to the General Regime for Collective Investment Bodies enshrined in Law no. 16/2015, of 24 February (which transpose to the domestic law of France and Portugal Directive 2011/61/EU, of 8 June 2011), cf. copies of the certificate of French commercial registration and the registration publication relating to the respective titles, duly translated, which constitute documents nos. 5 and 6 attached to the ara.
c) The represented company engages in collective investment in real estate assets, through the contribution of various investors, in accordance with the investment policy defined by the respective investment company and in compliance with a principle of risk distribution, cf. the aforementioned docs. 4 to 6, and copies of the Prospectus and Key Information Document of the Claimant, duly translated, which constitute documents nos. 7 and 8 attached to the ara.
d) The represented company has its activity subject to authorization and supervision by the competent regulator, the Financial Markets Authority "Authorité des Marchés Financiers" (AMF), which issued it the "S.P.C.I. visa no. 12-14", of 24 July 2012, cf. document no. 9 attached to the ara, equally translated to Portuguese, as well as, insofar as it develops activity in Portugal, to the supervision of the Securities Market Commission ("CMVM").
e) The represented company is managed by an investment fund management company – B..., registered in the Commercial and Companies Register of Paris under no. ..., authorized and subject to supervision by the aforementioned AMF, cf. cited documents nos. 5, 7 and 8.
f) On 9 April 2014, the Claimant submitted a declaration model 1 of IMT, manifesting to the Tax Authority the intention to acquire from the company D..., S.A., taxpayer no. ..., with registered office at Rua ..., no. ..., ... in Lisbon, for the price of €4,150,000.00 (four million, one hundred and fifty thousand euros) the autonomous fraction identified by the letter "A", intended for commerce, corresponding to the ground floor of the Central Block of the urban property constituted under the regime of horizontal property, located at ..., in Braga, registered in the property matrix of the Union of Parishes of ... (... and ...), municipality of Braga, under article ..., and described in the Second Land Registry Conservation Office of Braga under no. ..., cf. document no. 2 attached to the ara.
g) On 09 April 2014, the Tax and Customs Authority (TA), proceeded to assess IMT contained in document no. ..., in the amount of €269,750.00, concerning the aforementioned onerous transfer, cf. document no. 2 attached to the ara.
h) On 10 April 2014 the Claimant proceeded to pay the amount assessed, cf. document no. 10 attached to the ara.
i) By deed of purchase and sale executed at the Notarial Office of E..., located at ..., no. ..., in Lisbon, on 11 April 2014, the aforementioned autonomous fraction was acquired by A..., with the aforementioned deed providing that the said declaration model 1 of IMT as well as the respective proof of payment were filed therein, cf. document no. 11 attached to the ara.
j) On 16 December 2014, the Claimant submitted a declaration model 1 of IMT, manifesting to the Tax Authority the intention to acquire from the company Closed Special Real Estate Investment Fund F..., taxpayer no. ..., with registered office at Rua ..., no. ..., in Lisbon, for the global price of €28,700,307.00 (twenty-eight million, seven hundred thousand, three hundred and seven euros) the following properties, cf. document no. 12 attached to the ara:
1. The urban property intended for residential use, located at ..., ..., in Tondela, registered in the property matrix of the parish of ..., municipality of Tondela, under article ..., and described in the Land Registry Conservation Office of Tondela under no. ... of the said parish of ... and under no. ... of the parish of ..., for the individual price of €5,478,275.00 (five million four hundred and seventy-eight thousand, two hundred and seventy-five euros);
2. The urban property intended for commercial use, located at ..., ..., registered in the property matrix of the Union of Parishes of ... and ..., municipality of Monção, under article ..., and described in the Land Registry Conservation Office of Monção under no. ... of the parish of ... for the individual price of €5,463,319.00 (five million four hundred and sixty-three thousand three hundred and nineteen euros);
3. The urban property intended for commercial use located at the place of ..., ..., registered in the property matrix of the parish of ..., municipality of Vila Nova de Cerveira, under article ..., and described in the Land Registry Conservation Office of Vila Nova de Cerveira under no. ... of the said parish, for the individual price of €6,181,237.00 (six million one hundred and eighty-one thousand two hundred and thirty-seven euros);
4. The urban property intended for commercial use located at ..., Vizela, registered in the property matrix of the Union of Parishes of ... (... and ...) under article ..., and described in the Land Registry Conservation Office of Vizela under no. ... of the parish of ..., for the individual price of €5,915,769.00 (five million nine hundred and fifteen thousand seven hundred and sixty-nine euros); and
5. The urban property intended for commercial use located at the place ..., Vila Verde, registered in the property matrix of the parish of ... and ..., municipality of Vila Verde, under article ..., and described in the Land Registry Conservation Office of Vila Verde under no. ... of the parish of ..., for the individual price of €5,661,707.00 (five million six hundred and sixty-one thousand seven hundred and seven euros).
k) On 16 December 2014, the Tax and Customs Authority (TA), proceeded to assess IMT contained in document no. ..., in the amount of €1,865,519.98, concerning the aforementioned onerous transfer, cf. document no. 3 attached to the ara.
l) On the same date the Claimant proceeded to pay the amount assessed, cf. vignette affixed to document no. 3 attached to the ara.
m) By deed of purchase and sale executed at the Notarial Office of G..., located at ..., no. ..., in Lisbon, on 19 December 2014, the aforementioned properties were acquired by A..., with the aforementioned deed providing that the said declaration model 1 of IMT as well as the respective proof of payment were filed therein, cf. document no. 12 attached to the ara.
n) On 09 April 2018 (registration no. RH ... PT) the Claimant submitted a request for ex officio review of the aforementioned assessment acts, under Article 78 of the General Tax Law, cf. document no. 1 attached to the ara.
o) On 6 November 2018 a request for arbitral decision was submitted by the Claimant which gave rise to this proceeding.
3.2 Unproven Facts
There are no facts relevant to the decision of the case that should be considered unproven.
3.3 Reasoning
With respect to the matters of fact, the Tribunal has no duty to pronounce on all the matters alleged, but rather has the duty to select those relevant to the decision, taking into account the ground (or grounds) of the claim that substantiate the request formulated by the claimant [(cf. Articles 596, paragraph 1 and 607, paragraphs 2 to 4 of the CPC, applicable ex vi of Article 29, paragraph 1, subparagraphs a) and e) of the LRAT)] and to state whether it considers it proven or unproven (cf. Article 123, paragraph 2 of the TPPC).
According to the principle of free evaluation of evidence, the Tribunal bases its decision, with regard to the evidence produced, on its intimate conviction, formed from the examination and assessment it makes of the means of evidence brought to the proceeding and in accordance with its life experience and knowledge of people (cf. Article 607, paragraph 5 of the CPC). Only when the probative force of certain means is pre-established by law (e.g. full probative force of authentic documents, cf. Article 371 of the Civil Code) does the principle of free evaluation of evidence not govern the assessment of the evidence produced.
Thus, the Tribunal's conviction was based on the documentary evidence attached to the record as well as on the positions assumed by the parties.
4 - Matters of Law (Reasoning)
Subject Matter of the Dispute
The question that constitutes the thema decidendum comes down to whether on the date the aforementioned properties were transferred (11-04-2014 and 19-12-2014) Article 1 of Decree-Law no. 1/87, of 3 January, was in force in the legal order.
Questions to be Decided:
- On the (i)llegality of the contested assessments; and
- On the request for payment of compensatory interest.
4.1 - On the (i)llegality of the Contested Assessments
The Claimant contends that the IMT assessments nos. ..., in the amount of €269,750.00 and ..., in the amount of €1,865,519.98 are illegal, due to error in the material and legal premises on which their issuance was based, both because on the date they were made was in force in the legal order the exemption rule contained in Article 1 of Decree-Law no. 1/87, of 3 January, according to which "Acquisitions of real estate made for a real estate investment fund by the respective investment company are exempt from sisa [property transfer tax]", and because such rule could not fail to be applicable to it, given its nature as an open real estate collective investment body, established in France in the form of a Société Civile de Placement Immobilier, subject to the regime provided for in Articles 1832 et seq. of the French Civil Code and Articles L.214-50 to L.214-84 and R.214-116 to R.2014-143 of the French Monetary and Financial Code and, in Portugal, to the General Regime for Collective Investment Bodies enshrined in Law no. 16/2015, of 24 February, regimes that resulted from the transposition of Directive 2011/61/EU, of 8 June 2011.
The question relating to the validity of Article 1 of Decree-Law no. 1/87, of 3 January, has already been the subject of several arbitral decisions, all in agreement that it remained in force on the date of the facts, having been neither expressly nor tacitly repealed.
Indeed, the express repeal of the aforementioned rule was effected by Article 319 of Law no. 71/2018, of 31 December, which approved the State Budget for 2019.
Let us examine this then:
Legal rules are rules of conduct and, as such, participate in the principles of legal certainty and security, guaranteeing that the expectations on which each one bases its decisions are in conformity with the stability of social life and that it is possible for everyone to know which rules are in force at any given moment, in order to guide their choices by them.
With respect to the end of the validity of laws, Article 7 of the Civil Code provides that they may cease to be in force through expiration or through repeal, express or tacit:
"Article 7 - Cessation of Validity of the Law
1. When not intended to have temporary validity, a law ceases to be valid only if it is repealed by another law.
2. Repeal may result from express declaration, from incompatibility between the new provisions and the prior rules or from the circumstance that the new law regulates the entire subject matter of the prior law.
3. General law does not repeal special law, except if the unequivocal intention of the legislator is otherwise.
4. Repeal of the repealing law does not entail the revival of the law which it had repealed.".
Thus, a law will expire only by a supervening fact provided therein, if it is intended to have temporary validity; otherwise, a law will cease to be in force if it is repealed, expressly or tacitly, partially or wholly, upon the entry into force of a new law.
Decree-Law no. 1/87, of 3 January, in accordance with its preamble, was issued following the regulation of the activity of Real Estate Investment Funds by Decree-Law no. 246/85, of 12 July, with the Government recognizing "the important contribution that this new type of financial institutions could bring to the formation of savings and their mobilization for investments in the real estate sector. There are added the positive effects that will thus be induced in the construction industries and in the rental market for residential and office properties.".
As those reasons were considered relevant, they justified the definition of "an adequate tax framework" to promote the necessary conditions for the creation of investment funds with those characteristics, which included, among other measures, the one established in its Article 1, of the benefit of Sisa exemption for "acquisitions of real estate made for a real estate investment fund by the respective investment company".
Not containing Decree-Law no. 1/87, of 3 January, any rule establishing its temporary validity, it must be concluded that its Article 1 has not ceased to be in force through expiration.
Let us then see whether its express or tacit repeal has occurred, namely through "incompatibility between the new provisions and the prior rules or from the circumstance that the new law regulates the entire subject matter of the prior law".
Article 28 of Decree-Law no. 287/2003, of 12 November, which approved the Code of IMI and the Code of IMT, contains a rule of reference concerning scattered tax benefits under municipal property contribution and municipal property transfer tax, to be carried over to the new municipal tax on real estate and municipal tax on onerous property transfers, respectively, as follows:
"Article 28 - References
1 - All legal texts that mention the Code of Municipal Property Contribution or municipal property contribution are considered to refer to the Code of Municipal Tax on Real Property (CIMRP) or to the municipal tax on real property (IMR).
2 - All legal texts that mention the Code of Municipal Property Transfer Tax and the Code of Inheritance and Gift Tax, municipal property transfer tax or inheritance and gift tax are considered to refer to the Code of Municipal Tax on Onerous Property Transfers (CITOPT), to the Stamp Tax Code, to the municipal tax on onerous property transfers (IMT) and to stamp tax, respectively."
In turn, paragraph 6 of Article 31 of the aforementioned Decree-Law no. 287/2003, of 12 November, establishes that "6 - The tax benefits relating to municipal property contribution, now referred to IMI, as well as those relating to municipal property transfer tax established in legislation external to the Code approved by Decree-Law no. 41969, of 24 November 1958, and in the Tax Benefits Status, which now refer to IMT, are maintained in force."
From the joint interpretation of the rules of Articles 28 and paragraph 6 of Article 31, both of Decree-Law no. 287/2003, of 12 November, it results, with reasonable certainty, that the tax benefit under analysis was maintained following the reform of patrimony taxation, with no notice of its express repeal as of the date of the facts.
That is why the legislator felt the need to proceed with the express repeal of the aforementioned Article 1 of Decree-Law no. 1/87, of 3 January, by Article 319 of Law no. 71/2018, of 31 December, which approved the State Budget for 2019.
This alone would be sufficient to rule out the hypothesis of eventual tacit repeal of Article 1 of Decree-Law no. 1/87, of 3 January.
Nevertheless, it will always be said that, to ascertain whether on the date of the facts there had been a tacit repeal of that rule, one would have to inquire into its (in)compatibility with the new provisions of the Tax Benefits Status (TBS), or whether these came to regulate the same prior subject matter, as required by paragraph 2 of Article 7 of the Civil Code.
Pursuant to the authorization granted to the Government by Article 12 of Law no. 30-G/2000, of 29 December, Decree-Law no. 198/2001, of 3 July, reviewed the articles of the TBS, having established, in its Article 46, the exemption from municipal property contribution for "properties integrated in real estate investment funds and equivalents, pension funds constituted in accordance with national legislation and retirement savings funds.".
Article 46 of the TBS would later be amended by Law no. 53-A/2006, of 29 December, thereby establishing the exemption from IMR and IMT for "properties integrated in real estate investment funds, pension funds and retirement savings funds that are constituted and operate in accordance with national legislation" (paragraph 1), benefiting properties integrated in mixed or closed real estate investment funds of private subscription from the reduction of IMR and IMT rates to half (paragraph 2).
Decree-Law no. 108/2008, of 26 June, made changes and republication of the TBS, the previous Article 46 being renumbered as Article 49, with the same wording. This Article 49 of the TBS, after the amendments effected by Laws no. 3-B/2010, of 28 April, no. 55-A/2010, of 31 December and no. 83-C/2013, of 31 December, the latter determining the reduction to half of IMR and IMT rates "applicable to properties integrated in open or closed real estate investment funds of public subscription, pension funds and retirement savings funds that are constituted and operate in accordance with national legislation", would later be repealed by Article 215 of Law no. 7-A/2016 of 30 March.
By conducting a comparative analysis of the wording given to Article 46 of the TBS by Law no. 53-A/2006, of 29 December and that of Article 1 of Decree-Law no. 1/87, of 3 January, it is believed that no normative incompatibility results, since while the latter establishes the exemption from sisa for "acquisitions of real estate made for a real estate investment fund by the respective investment company", the former came to establish the exemptions from IMR and IMT for "properties integrated in real estate investment funds, pension funds and retirement savings funds that are constituted and operate in accordance with national legislation".
It must thus be concluded, as in the decision handed down in case no. 544/2016-T, that "from the entry into force of the new wording of Article 46 of the TBS would be exempt from IMT, not only acquisitions of real estate carried out by investment fund management companies with the intention that they pass to integrate those funds – as provided in the preceding rule – but also properties integrated in real estate funds – as provided in that Article 46 of the TBS. In other words, the IMT exemption would henceforth apply both to real estate acquired to come to integrate real estate funds, as had hitherto been established, as well as to those same properties if and while integrated in real estate funds, under Article 46 of the TBS. In the first case, the exemption would be applicable whenever the fund was in the position of purchaser of the real estate. In the second case the exemption would be applicable whenever the fund was in the position of seller of the real estate. Thus, it is unavoidable to conclude that there is no incompatibility between the new provisions and the prior rules.
(…)
Despite the structural differences that separate both exemptions, the truth is that in both cases real estate investment fund management companies are placed in an economically advantageous position: either because they do not have to pay IMT when they acquire properties to integrate them into the respective real estate investment fund, or because they can place them on the market more easily by virtue of the prospective purchaser being exempt from IMT. The new provisions and the prior rules are not only entirely compatible but create a tax regime especially appealing for real estate fund management companies.
It is well understood the exemption of IMR in favor of properties integrated in real estate funds, insofar as this frees them from the payment of this annual tax on patrimony, provided for in Article 46 of the TBS before the wording given to it by the 2007 State Budget Law. However, it is also not negligible the utility that the IMT exemption, added by this statute, is of in the case of transactions in properties integrated in real estate funds.
(…)".
In light of the foregoing, it must thus be concluded for the maintenance in force of Article 1 of Decree-Law no. 1/87, of 3 January, until its express repeal by Law no. 71/2018, of 31 December.
A different question is whether, albeit in force in the national legal order, the exemption established by Article 1 of Decree-Law no. 1/87, of 3 January, would benefit the Claimant, in its capacity as a branch in Portugal of a "Civil property investment company with variable capital", established under French law and with registered office in France, managed by an investment fund management company matriculated in France or, put differently, whether the possible non-application of the aforementioned exemption to acquisitions of real estate effected by the Claimant in national territory would be contrary to European Union law, namely by violation of the principle of freedom of movement of capital, inherent in Article 63 of the Treaty on the Functioning of the European Union (TFEU).
Indeed, as this is a legal tax relationship that presents a connection with the legal orders of two countries of the European Union, the national court may be called upon to resolve the dispute through the application of a rule of community law and, in case of doubt about the interpretation to be given to the community rule, must raise a preliminary reference (Article 267 of the TFEU) to the Court of Justice of the European Union (CJEU), to which it is incumbent to pronounce on the interpretation and validity of the community rules with a view to uniform application of the treaties and European Union legislation in the community space.
The Claimant expressly asks that, should this arbitral tribunal, in its capacity as a national court (as such recognized by the CJEU in the Ascendi Decision, case C-377/13, available at http://curia.europa.eu/juris/liste.jsf?num=C-377/13&language=PT), sustain the understanding that the IMT exemption referred to in the rule of Article 1 of Decree-Law no. 1/87, of 3 January, does not apply to acquisitions of real estate effected by it, it raise the matter to the CJEU.
However, there shall be no preliminary reference "when there already exists case law on the matter (and when the possibly new framework does not raise any real doubt as to the possibility of applying that case law to the specific case) or when the correct way of interpreting the legal rule in question is unequivocal." .
Article 63, paragraph 1, of the TFEU provides that "all restrictions on the movement of capital between Member States and between Member States and third countries are prohibited", without prejudice to the right referred to in Article 65 of the TFEU, of Member States applying their provisions of a tax nature "that establish a distinction between taxpayers who are not in an identical situation with regard to their place of residence or the place where their capital is invested", provided that these do not constitute "a means of arbitrary discrimination, nor a disguised restriction on the freedom of movement of capital and payments".
Having regard to the abundant case law of the CJEU relating to the interpretation of Article 63 of the TFEU (freedom of movement of capital) in the sphere of direct taxation, it will be concluded that "recognizing the exemption benefit only to taxpayers resident within the territory discriminates operators on the basis of residence and inhibits non-resident taxpayers in other member states from applying their investments in Portugal" .
In this manner, there is no way not to consider that, finding itself the Claimant in a situation comparable to that of collective investment bodies constituted in Portugal, it will also benefit from the IMT exemption on acquisitions of real estate located in national territory.
In these terms, the contested assessments cannot stand and must be annulled.
4.2 – On the Request for Compensatory Interest
The tax arbitration proceeding was conceived as an alternative means to the judicial impugnation process (cf. the legislative authorization granted to the Government by Article 124, paragraph 2 (first part) of Law no. 3-B/2010, of 28 April – State Budget Law for 2010), and it should be understood that the competence of the arbitral tribunals functioning under the aegis of the CAAC comprises the same powers that, in judicial impugnation proceedings, are attributed to tax courts, such as that of assessing the right to compensatory interest.
Subparagraph b) of paragraph 1 of Article 24 of the LRAT determines that the arbitral decision on the merits of the claim to which no appeal or impugnation lies binds the tax authority as from the end of the period provided for appeal or impugnation, the latter being required to, in the precise terms of the merits of the arbitral decision in favor of the taxpayer and until the end of the period provided for the execution of sentences of tax judicial courts, "restore the situation that would exist if the tax act that is the subject of the arbitral decision had not been performed, adopting the acts and operations necessary for that effect".
Likewise, Article 100 of the GTL, applicable to the tax arbitration proceeding by virtue of the provision in subparagraph a) of paragraph 1 of Article 29 of the LRAT, establishes that "The tax authority is obliged, in case of total or partial merits of complaints or administrative appeals, or of judicial proceeding in favor of the taxpayer, to the immediate and full restoration of the situation that would exist if the illegality had not been committed, including the payment of compensatory interest, in the terms and conditions provided by law.".
The regime for compensatory interest is contained in Article 43 of the General Tax Law (GTL), according to whose paragraph 1, "Compensatory interest is due when it is determined, in an administrative complaint or judicial impugnation, that there was error attributable to the services resulting in payment of the tax debt in an amount higher than the legally due.".
Although in the situation under analysis the contested assessments suffer from a defect of violation of law due to error by the Tax Authority regarding the material and legal premises on which its issuance was based, the Claimant did not present an administrative complaint or judicial impugnation, but rather an ex officio review request, on 9 April 2018, that is, within four years after the date of the assessments, made on 9 April 2014 and 16 December 2014.
In such cases, the right to compensatory interest does not have the same scope resulting from the provision in paragraph 1 of Article 43 of the GTL, but rather suffers the restriction referred to in subparagraph c) of paragraph 3 of the cited article, since "When the review of the tax act at the initiative of the taxpayer is carried out more than one year after the taxpayer's request, except if the delay is not attributable to the tax authority.".
Thus, as the ex officio review request of the assessments now contested was formulated before the Tax Authority on 9 April 2018, only as from the end of one year after that date may the right to compensatory interest be recognized to the Claimant, since "The legislator considers that the one-year period is the reasonable period for the Administration to decide the review request and to execute the respective decision, when favorable to the taxpayer, doing away with full indemnification of damages from the moment they arose in the patrimonial sphere of the taxpayer." .
5 - Decision
In these terms this Arbitral Tribunal agrees to:
a. Adjudge the request for arbitral decision to have merit, insofar as it concerns the declaration of illegality of the IMT assessments nos. ... and ..., in the total amount of €2,135,269.98, determining their respective annulment;
b. Condemn the Tax and Customs Authority to the restitution to the Claimant of the amounts unduly paid by the latter;
c. Condemn the Tax and Customs Authority to payment of compensatory interest, to be calculated from 9 April 2019, at the legal rate on the amounts to be restituted, pursuant to Article 43, paragraph 3, subparagraph c), of the GTL.
Value of the Case
In accordance with the provisions of Articles 306, paragraph 2, of the CPC, 97-A, paragraph 1, subparagraph a) of the TPPC and 3, paragraph 2 of the Regulation of Costs in Tax Arbitration Proceedings (RCTAP), the value of the case is set at €2,135,269.98 (two million, one hundred and thirty-five thousand, two hundred and sixty-nine euros and ninety-eight cents).
Costs
Pursuant to Article 22, paragraph 4 of the LRAT, the amount of costs is set at €27,846.00, in accordance with Table I, annexed to the RCTAP, to be borne by the Respondent.
Notify.
Lisbon, 2 May 2019
The Collective Arbitral Tribunal
The Arbitrator-Chairman,
(José Poças Falcão)
The Arbitrator-Member,
(Rui Rodrigues)
The Arbitrator-Member,
(Mariana Vargas)
Text prepared by computer, in accordance with the provision in Article 131, paragraph 5, of the CPC, applicable by reference in Article 29, paragraph 1, subparagraph e), of the LRAT.
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