Summary
Full Decision
ARBITRAL DECISION
Agree in Arbitral Court
I – Report
1. A..., S.A., holder of tax identification number..., with registered office at Av. ..., ..., ..., ...-... ..., hereby, in its capacity as management company and in representation of B... – Closed Special Real Estate Investment Fund, has presented a request for constitution of an arbitral tribunal, pursuant to the provisions of articles 2, no. 1, paragraph a), and 10 et seq. of Decree-Law no. 10/2011, of 20 January, to assess the legality of the implicit act of dismissal of the request for official review submitted before the Tax Authority with a view to annulling the tax act of assessment of Municipal Tax on Onerous Real Estate Transfers (IMT), in the total amount of € 64,441.89, relating to the acquisition of various real properties, and, likewise, requesting the annulment of such acts and the consequent reimbursement of the tax unduly paid and condemnation to payment of compensatory interest.
The request is grounded on the following terms:
The B... – Closed Special Real Estate Investment Fund is configured as a real estate investment fund that is managed by the Applicant and whose activity is regulated by the General Regime of Collective Investment Undertakings, approved by Law no. 16/2015, of 24 February.
In the exercise of its activity, the Applicant acquires real properties, in representation of real estate investment funds, which are integrated into the assets of the real estate investment funds under its management.
In July 2015, the Applicant, in representation of Fund B..., acquired, by public deed of purchase and sale, a real property located in the parish of ... and municipality of ..., under the matriculation article..., for the amount of € 273,000.00, as well as the real properties located in the parish and municipality of ..., under the matriculation article..., for the amount of € 492,581.00, under the matriculation article..., for the amount of € 227,987.00, and under the matriculation article..., for the amount of € 102,432.00.
The acquisitions were taxed in IMT through the assessment act no...., in the amount of € 64,441.89.
However, the aforementioned acquisitions are covered by the exemption provided for in article 1 of Decree-Law no. 1/87, of 3 January, which declares "exempt from transfer tax the acquisitions of real properties made for a real estate investment fund by the respective management company", this provision having been reserved and kept in force by Decree-Law no. 287/2003, of 12 November, which reformed the taxation of property and approved the creation of IMT and IMI, and, especially, by the provisions of no. 2 of article 28 and no. 6 of article 31 of that diploma.
This provision was not expressly or implicitly repealed by article 46 of the Tax Benefits Statute (subsequently renumbered as article 49), which merely established the exemption of municipal property tax (IMI) and municipal tax on onerous real estate transfers (IMT) on properties integrated in real estate investment funds.
The Tax Authority did not respond.
2. No request for production of testimonial evidence was made, and following the procedure, the meeting referred to in article 18 of the RJAT was waived, the procedure proceeding to submissions.
In submissions, the Applicant maintained its previous position. The Tax Authority did not submit counter-submissions.
3. The request for constitution of the arbitral tribunal was accepted by the President of CAAD and automatically notified to the Tax and Customs Authority in accordance with regulatory terms.
Pursuant to the provisions of paragraph a) of no. 2 of article 6 and paragraph b) of no. 1 of article 11 of the RJAT, as amended by article 228 of Law no. 66-B/2012, of 31 December, the Deontological Council designated as arbitrators of the collective arbitral tribunal the signatories, who communicated acceptance of the office within the applicable period.
The parties were timely and duly notified of this designation and did not manifest any wish to refuse it, in accordance with the combined provisions of article 11, no. 1, paragraphs a) and b), of the RJAT and articles 6 and 7 of the Deontological Code.
Thus, in conformity with the provision of paragraph c) of no. 1 of article 11 of the RJAT, as amended by article 228 of Law no. 66-B/2012, of 31 December, the collective arbitral tribunal was constituted on 17 January 2019.
The arbitral tribunal was regularly constituted and is materially competent, in accordance with the provisions of articles 2, no. 1, paragraph a), and 30, no. 1, of Decree-Law no. 10/2011, of 20 January.
The parties possess legal personality and capacity, are legitimate, and are represented (articles 4 and 10, no. 2, of the same diploma and 1 of Ordinance no. 112-A/2011, of 22 March).
The procedure is free from nullities and no exceptions have been raised.
It is for us to assess and decide.
II – Grounds
Factual Matters
4. The factual matters relevant to the decision of the case are as follows:
a) The B... – Closed Special Real Estate Investment Fund, managed by the Applicant, is a real estate investment fund whose activity is regulated by the General Regime of Collective Investment Undertakings, approved by Law no. 16/2015, of 24 February;
b) In the exercise of its activity, the Applicant acquires real properties, in representation of real estate investment funds, which are integrated into the assets of the funds under its management;
c) In July 2015, the Applicant, in representation of Fund B..., acquired, by public deed of purchase and sale, the real properties registered in the property matrix of the parish of ..., of the municipality of ..., for the amount of € 273,000.00, as well as the real properties registered in the property matrix of the parish and municipality of ..., for the amounts of € 492,581.00, € 227,987.00, and € 102,432.00;
d) With respect to these acquisitions, the Tax Authority issued the IMT assessment act no...., in the amount of € 64,441.89;
e) The Applicant proceeded to pay the tax due;
f) On 10 April 2018, the Applicant submitted to the Tax Authority a request for official review having as its object the assessment referred to in the previous paragraph d), on which the Administration did not pronounce itself within the legally prescribed period.
The Tribunal formed its conviction regarding proven facts based on the documents attached to the petition, which was not questioned by the Tax Authority.
Legal Question
5. The Applicant requests that the acquisition of real properties made for the Real Estate Investment Funds under its management are covered by the IMT exemption, originally provided for in article 1 of Decree-Law no. 1/87, of 3 January, as a transfer tax exemption, and which was reserved by article 28, no. 2, of Decree-Law no. 287/2003, of 12 November, and kept in force by article 31, no. 6, of that diploma.
The question that arises, therefore, is whether subsequent legislative developments ceased the effectiveness of the said provision of article 1 of Decree-Law no. 1/87.
On this matter, arbitral decisions rendered in Proceedings no. 622/2018-T, 316/2018-T, 326/2018-T, and 606/2018-T have already pronounced – in line with what was also decided in Proceeding no. 544/2016-T – and which, given the absence of need for any other considerations, are now reproduced:
"Decree-Law no. 1/87 provides in its article 1 that 'acquisitions of real properties made for a real estate investment fund by the respective management company are exempt from transfer tax.' The provision arises following the regulation of real estate investment funds, carried out by Decree-Law no. 246/85, of 12 July, and, as is evident from its preamble, was intended to define an appropriate tax framework for the creation of such funds to which the Government recognizes an important contribution to savings formation and mobilization of investments in the real estate sector, with positive effects on construction and the real property rental market.
Meanwhile, Decree-Law no. 287/2003, of 12 November, which reformed the taxation of property, approving in an annex the Code of Municipal Tax on Real Property (CIMI) and the Code of Municipal Tax on Onerous Real Estate Transfers (CIMT), determined in its article 28, no. 2, that references in legal texts to the municipal transfer tax are to be considered as referring to the Code of Municipal Tax on Onerous Real Estate Transfers.
Moreover, the same diploma, in article 31 – which included various repeal provisions – reserved in its no. 6 the maintenance in force of tax benefits relating to the municipal transfer tax established in separate legislation.
Thus, in accordance with the combined interpretation of the cited provisions of articles 28 and 31, no. 6, of Decree-Law no. 287/2003, exemptions from transfer tax contained in any separate statutes should be considered as referring to IMT, and, on the other hand, acquisitions of real properties made for a real estate investment fund would continue to be exempt from IMT as a result of what was established in article 1 of Decree-Law no. 1/87.
Following the creation of the transfer tax exemption concerning the acquisition of real property for real estate investment funds in 1987, Decree-Law no. 215/89, of 1 July, approved the Tax Benefits Statute, with the clear purpose of systematizing the general principles to which the attribution of benefit situations should comply. The EBF followed the reform of income tax on individuals (CIRS), income tax on legal entities (CIRC), and municipal contribution (CA), which had already introduced some structural tax relief mechanisms, so the Statute was intended to characterize some other situations of less structural character but that would have relative stability, leaving to future State budget laws benefits with markedly cyclical purposes or that would require more frequent regulation (cf. its respective preamble note).
In the original wording of the EBF, and in relation to real estate management and investment companies, only a specific tax regime for taxation in the matter of corporation tax (IRC) and, for income tax (IRS), regarding profits distributed by those companies to their respective members (article 26) was contemplated. This regime was maintained with various amendments and came to transition to article 22 with Law no. 109-B/2001, of 27 December, under the heading 'Investment Funds,' which was also subject to various legislative modifications.
It is the new wording given to article 46 of the EBF by the State Budget Law for 2003 (Law no. 32-B/2002, of 30 December) that provides, for the first time, a tax exemption regime in favor of real estate investment funds in the matter of municipal contribution, in the following terms:
Properties integrated in real estate investment funds and equivalent, pension funds, and retirement savings funds, which are constituted and operate in accordance with national legislation, are exempt from municipal contribution.
Following the reform of property taxation, approved by the aforementioned Decree-Law no. 287/2003 – which repealed the Code of Municipal Contribution – this article 46, in the wording given by the State Budget Law for 2007 (Law 53-A/2006, of 29 December), came to establish the exemption of municipal property tax (IMI) and municipal tax on onerous real estate transfers (IMT) for properties integrated in real estate investment funds, under the same conditions that already appeared in the previous wording of the provision, and Decree-Law no. 108/2008, of 26 June, maintained this same exemption in the same terms.
Law no. 3-B/2010, of 28 April, being also a budget law, through new wording given to article 49 of the EBF, came to exempt from municipal property tax and municipal tax on onerous real estate transfers only 'properties integrated in open real estate investment funds,' and the State Budget Law for 2012 (Law no. 55-A/2010, of 31 December) extended this exemption to 'properties integrated in open or closed real estate investment funds of public subscription.'
Law no. 83-C/2013, of 31 December, amending this article 49, suppressed the exemption, coming instead to provide for a reduction by half of the rates of municipal property tax and municipal tax on onerous real estate transfers applicable to properties integrated in open or closed real estate investment funds of public subscription.
Article 49 of the EBF was repealed by article 215, no. 1, paragraph g), of Law no. 7-A/2016, of 30 March.
[6.] From the legislative evolution just described, the idea emerges that the tax benefits attributed to real estate investment funds do not have a systematic character, instead assuming a markedly cyclical nature, thus justifying that successive amendments to the legal regime have been established, as a rule, through budget laws.
Suffice it to note that it began by providing for the exemption of municipal contribution – and of IMI and IMT – in relation to properties integrated in any type of real estate fund, to later restrict this exemption to properties integrated in open real estate investment funds. Later, the exemption was restored regarding properties integrated in open or closed real estate investment funds of public subscription until the tax benefit was transformed into a reduction of the applicable tax rate and, finally, was suppressed.
It is not possible to see, therefore, in the approval of the EBF and in the multiple amendments to that Statute a general criterion that would allow defining a stable tax regime that could override other separate provisions that already existed in the legal order.
Furthermore, it is important to note that the scope of application of the exemption initially created by Law no. 53-A/2006, through the amendment of article 46 of the EBF – which came to provide for the exemption of IMI and IMT in relation to properties integrated in real estate investment funds – is not coincident with that of the exemption contemplated in article 1 of Decree-Law no. 1/87, which refers to acquisitions of real properties made for a real estate investment fund by the respective management company. In fact, as a result of the new provision of article 46 of the EBF, properties already integrated in real estate funds came to be exempt from IMT, whereas the exemption referred to in the 1987 diploma covered acquisitions of real properties made by management companies of real estate investment funds to become part of the assets of those funds. This means that the EBF came to broaden the exemption, covering not only situations where the fund was in the position of acquirer of the real property, but also those where the fund acts in the position of seller of the real property (cf. in this sense, the arbitral decision rendered in Proceeding no. 544/2016, in which the same question was analyzed).
[7.] It now falls to address the question of whether the norm of article 1 of Decree-Law no. 1/87 is repealed by any of the provisions of the EBF that came to regulate the exemption of IMT in relation to real estate investment funds or whether there was place for a systemic repeal as a result of the new overall regulation of the matter of tax benefits.
As follows from article 7, no. 2, of the Civil Code, the repeal of the law 'may result from express declaration, from incompatibility between the new provisions and the preceding rules, or from the circumstance that the new law regulates all the matter of the previous law.'
Repeal is express when a law identifies, in an explicit statement, the object of cessation of effectiveness of a preceding law. Implicit repeal occurs when, faced with the silence of the legislator on the identification of the repealed norms, there is registered an incompatibility of content between the provisions of a new law and those of a chronologically preceding legislative act. Global repeal occurs when a normative complex comes to be, in its entirety, subject to a discipline different from that which previously prevailed, regardless of the issue of its compatibility with the rules previously in force (cf. BAPTISTA MACHADO, Introduction to Law and Legitimizing Discourse, Coimbra, 1993, pp. 165-166; CARLOS BLANCO MORAIS, Reinforced Laws – Reinforced Laws of Procedure Within the Scope of Structuring Criteria of Relations Between Legislative Acts, Coimbra, 1998, pp. 338, 341, and 343).
Express repeal does not raise special difficulties. It consists of a declaration made in the new law and may be limited to extinguishing the effectiveness of the old law or to resuming a prior legal regime that had been repealed by it, or be accompanied by constitutive or modificative effects, as occurs when the repealing law institutes a new normative complex or operates the modification of the prior legal regime.
Implicit repeal occurs to the extent of the contradiction existing between the preceding law and the new law, for where such contradiction does not occur, the coexistence or interpenetration between the two laws is possible.
Global repeal has in common with implicit repeal the fact that it operates in the eventual silence of the legislator, who may say nothing about the suppression of preceding laws, but differs from it in that it does not necessarily register a general incompatibility of commands between the old law and the new law. The ratio of this mode of repeal is anchored essentially in reasons associated with updating the process of legal innovation or policies of systematization and legislative consolidation (CARLOS BLANCO MORAIS, op. cit., p. 344).
[8.] Applying the principles just enunciated to the situation sub judice, it is easily concluded that the norm of article 1 of Decree-Law no. 1/87 cannot be considered repealed.
It is established that the norm of article 1 of Decree-Law no. 1/87 was not subject to express repeal. And, as was intimated, there is no incompatibility between that norm and the one that came to be introduced in the EBF (article 46 later renumbered as article 49), since these provisions contain different scopes of application, and the latter merely enlarged the exemption already established by the 1987 diploma.
The possibility of a systemic repeal having occurred is also ruled out. As was exposition, the EBF, in its original version, and in relation to real estate management and investment companies, established only a specific tax regime in the matter of IRC and IRS. And only much later, through budget laws, was it established with respect to real estate funds, through the new wording given to article 46 (later renumbered as article 49), the exemption in the matter of taxation of property by reference to municipal contribution and, later, to IMI and IMT (Laws no. 32-B/2002, of 30 December, and 53-A/2006, of 29 December). This regime underwent further successive amendments until the tax benefit came to translate into a reduction by half of the rates of tax on real property and tax on onerous real estate transfers (Law no. 83-C/2013, of 31 December) and was finally extinguished through the repeal of article 49 operated by Law no. 7-A/2016, of 30 March.
With the approval of the Tax Benefits Statute, tax benefits of a structural character applicable to the financial system and capital market, here including investment funds, focused on income taxation. The subsequent introduction of an exemption of IMI and IMT applicable to investment funds, in the category of tax benefits relating to real property, through mere amendment of an already existing provision, does not evidence any general criterion defining the regime of tax benefits in the matter of property taxation, and the subsequent legislative evolution reveals that the exemption was instituted for merely cyclical reasons and without a clear purpose of systematizing the legal regime.
In these conditions, one cannot speak of a global repeal of article 1 of Decree-Law no. 1/87."
All these considerations maintain full validity and are applicable to the situation of the concrete case, leading to the conclusion that the tax acts of IMT relating to the acquisition of real properties by the Applicant as representative of the Real Estate Investment Funds are illegal for violation of the provisions of the aforementioned article 1 of Decree-Law no. 1/87, of 3 January.
Compensatory Interest
The Applicant further requests condemnation of the Tax Authority to payment of compensatory interest, at the legal rate, calculated on the tax, until full reimbursement of the amount owed.
In accordance with the provision of paragraph b) of article 24 of the RJAT, the arbitral decision on the merits of the claim, which is not subject to appeal or challenge, binds the Tax Administration in the exact terms of the success of the arbitral decision in favor of the taxpayer, being incumbent on it to 'restore the situation that would have existed had the tax act that is the object of the arbitral decision not been carried out, adopting the necessary acts and operations to that effect.' This is in line with the provision of article 100 of the LGT, applicable by virtue of the provision of paragraph a) of no. 1 of article 29 of the RJAT.
Again, pursuant to no. 5 of article 24 of the RJAT, 'payment of interest, regardless of its nature, is due in the terms provided for in the General Tax Law and in the Code of Tax Procedure and Process,' which refers to the provisions of articles 43, no. 1, of the LGT and 61, no. 5, of the CPPT, implying the payment of compensatory interest from the date of unduly payment of the tax until the date of processing of the respective credit note.
There is thus place, following the declaration of illegality of the IMT assessment act, for the payment of compensatory interest, in accordance with the cited provisions of articles 43, no. 1, of the LGT and 61, no. 5, of the CPPT, calculated on the amount that the Applicant unduly paid, at the rate of legal interest (articles 35, no. 10, and 43, no. 4, of the LGT).
III – Decision
Therefore, it is decided:
a) To uphold the request for arbitral pronouncement and annul the tax assessment act no...., in the amount of € 64,441.89, as well as the implicit act of dismissal of the request for official review filed against it;
b) To condemn to payment of compensatory interest from the payment of the tax until the date of issuance of the credit note, in accordance with articles 43 of the LGT and 61 of the CPPT.
Value of the Case
The Applicant indicated as the value of the case the amount of € 64,441.89, which was not contested by the Respondent and corresponds to the value of the assessment that was intended to be opposed (article 97, no. 1, paragraph a), of the CPPT).
Costs
Pursuant to articles 12, no. 2, and 24, no. 4, of the RJAT, and 3, no. 2, of the Regulation of Costs in Tax Arbitration Proceedings and Table I attached to that Regulation, the amount of costs is fixed at € 2,448.00, which is charged to the Respondent.
Notify.
Lisbon, 26 June 2019
The President of the Arbitral Tribunal
Carlos Fernandes Cadilha
The Arbitrator
Arlindo José Francisco
The Arbitrator
Nuno Maldonado Sousa
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