Summary
Full Decision
ARBITRAL DECISION
The arbitrators designated by the Ethics Council of the Administrative Arbitration Centre to form the Arbitral Tribunal, constituted on 8 January 2018, Dr. Alexandra Coelho Martins (chair), Professor Doctor Fernando Borges Araújo and Dr. Nuno Maldonado Sousa, agree as follows:
REPORT
A..., S.A., legal entity number ..., with registered office at Rua ..., no. ..., ...-... Lisbon, hereinafter referred to as the "Applicant", has requested the constitution of a Collective Arbitral Tribunal, pursuant to the provisions of Article 2, paragraph 1, subsection a) of the Legal Regime for Tax Arbitration ("RJAT"), approved by Decree-Law no. 10/2011, of 20 January, and by Ordinance no. 112-A/2011, of 22 March.
In this context, it has submitted the following requests for arbitral decision:
Assessment of the (il)legality of the tax act of assessment of Municipal Tax on Onerous Transfers of Real Property ("IMT") issued by the Respondent (AT), identified under no. ..., dated 17 May 2016, in the amount of €71,738.48, and consequent annulment thereof, as well as of the decision dismissing the Administrative Claim filed against such act, of 21 July 2017; and
Reimbursement of the amount of tax paid (€71,738.48), plus compensatory interest at the legal rate, from the date of dismissal of the claim until full reimbursement.
The request for constitution of the Arbitral Tribunal was accepted by the President of CAAD and followed its normal procedural course, namely with notification to AT.
The Ethics Council designated as arbitrators of the collective arbitral tribunal the undersigned, who communicated acceptance of the appointment within the applicable timeframe, pursuant to the provisions of Article 6, paragraph 2, subsection a) and Article 11, paragraph 1, subsection a), both of the RJAT.
The parties, duly notified, did not express their intention to challenge the appointments and the collective arbitral tribunal was constituted on 8 January 2018, in accordance with Article 11, paragraph 1, subsections b) and c) of the RJAT and Articles 6 and 7 of the Ethics Code.
The Applicant alleged as grounds for its claim the expiry of the right to assess IMT, on the grounds that the taxable event, for the purposes of taxation under Municipal Property Transfer Tax and IMT, occurred on 27 May 2002, the date on which the promise to sell (2001), payment of the remainder of the price and delivery of possession of the property in question converged. Thus, at the time of the deed that produced the effects of transferring the right of ownership, executed in 2016, AT could no longer proceed with the IMT assessment since that right had expired, pursuant to Article 92 of the Code of Municipal Property Transfer Tax and the Tax on Succession and Donations ("CIMSISD").
AT submitted its response, attaching the administrative file. It considered that there should be no oral witness evidence and argued for the dismissal of the request for arbitral decision, due to the absence of proof of the alleged delivery of possession of the property, with the consequent dismissal of all claims.
On 7 March 2018, the Tribunal held the meeting provided for in Article 18 of the RJAT and proceeded to hear the three witnesses listed by the Applicant, considering it useful to the ascertainment of material truth, and it was subject to audio recording.
Documents were submitted by the Applicant and it was requested by the Tribunal to provide legible copies of documents submitted with the initial petition. The parties were notified to submit final arguments and of the deadline for issuing the decision, which was set for 8 June 2018.
The Applicant submitted arguments on 27 March 2018, followed by the arguments of the Respondent on 20 April 2018.
PRELIMINARY ASSESSMENT
The Tribunal was regularly constituted and is competent ratione materiae (cf. Articles 2, paragraph 1, subsection a) and 5 of the RJAT).
The parties enjoy legal personality and capacity, have standing and are regularly represented (cf. Articles 4 and 10, paragraph 2 of the RJAT and Article 1 of Ordinance no. 112-A/2011, of 22 March).
The proceedings are not affected by any nullities, and no preliminary issues have been raised.
REASONING
The only legal issue to be examined and decided concerns the assessment of the defect of expiry of the right to assess the tax (IMT) effected by AT in 2016, based on the alleged delivery of possession of the property in 2002, and consequent "onerous transfer of the real property", for the purposes of Article 2, paragraph 1, no. 2 of the CIMSISD, to the sphere of the promise-purchaser company B..., Lda., which was subsequently incorporated into the Applicant by a merger operation carried out in December 2004.
FACTUAL MATTERS
With relevance to the decision, the following facts should be noted:
On 12 December 2001, the company B..., Lda., with tax identification number ..., executed, in its capacity as promise-purchaser, with C... and D..., promise-vendors, represented by E..., a promise-to-buy-and-sell contract for the rural property located at ..., with an area of 21,770 m², described in the Property Registry of ..., under number ..., of the parish of ..., registered in the matrix under item ..., sheet of the AC map of the aforementioned parish – cf. copy of the promise-to-buy-and-sell contract, Document 3 attached to the initial petition.
In the aforementioned promise-to-buy-and-sell contract it was established that the rural property located at ... would be sold for the global price of Esc. 220,000,000$00 (two hundred and twenty million escudos), equivalent to €1,097,355.37 (one million ninety-seven thousand three hundred and fifty-five euros and thirty-seven cents), of which 66,000,000$00 (€329,206.61) was paid, as a deposit and part payment, upon signature of the promise contract, and it was established that the remaining 154,000,000$00 (€768,148.76) would be paid at the time of the deed of purchase and sale – cf. copy of the promise-to-buy-and-sell contract, Document 3 attached to the initial petition and copy of the cheque from Bank F... attached as Document 4.
On 10 May 2002, an addendum to the promise contract was executed, which extended the deadline for the execution of the public deed of purchase and sale of the rural property in question, which was set for 27 May 2002 – as per copy of the addendum attached to the initial petition as Document 5.
On 27 May 2002, the promise-vendors C... and D... executed, by public deed, an irrevocable power of attorney in favor of G..., H..., I... and J..., to whom they conferred the necessary powers to, as transcribed below:
"with discharge from accounting, each individually, in the name and representation of the principals, promise to sell and sell, to whomever and at such price and other conditions as they deem fit, promise to exchange and exchange, for such property and other conditions as they deem fit, the rural property, located at ..., with an area of twenty-one thousand seven hundred and seventy square metres, described in the Property Registry of ..., under number ..., of the parish of ..., and registered in the matrix under item sixteen, sheet of account AC of the aforementioned parish. Following the possible urbanization of this property, or the possible subdivision of the same, they confer upon them the powers to promise to sell and sell, promise to exchange and exchange, as well as to all or each one of the lots of land which may possibly be separated from the rural property above identified and which may come to constitute urban properties, with their own description numbers in the Property Registry and own matrix items in the Tax Department.
– They also confer upon them powers to sign promise-to-buy-and-sell contracts, execute deeds of purchase and sale, sign promise-to-exchange contracts, execute deeds of exchange, with such clauses, prices, values and other conditions as they deem fit to accept, to receive deposits, prices, exchanged property or values, to give and receive quittances, set-offs and compensatory values.
– They further confer upon them powers to mortgage the property above identified, or the properties that may come to be constituted from the same, by its urbanization or subdivision and consequent separations, to secure debts and obligations contracted by whoever, namely, debts and obligations arising from Loan Contracts, loaned amounts, financing of any kind, as well as all obligations derived from such acts.
– They further confer upon them powers to request and authorize any acts of registration, provisional or final, namely, of acquisition and mortgage, notes, cancellations and alterations to the description, with the Tax Departments, namely of ..., to request, authorize, promote and sign all that may be necessary, namely, registrations in the matrix, certificates, notes, cancellations, to submit tax notices and claims;
– They equally confer upon them powers to deal with Municipal Chambers, namely, of ..., other local authorities and other bodies and services of the Central and Local Administration on any matters related to the aforementioned property, namely, to submit and request urbanization or subdivision projects, approval of urbanization or subdivision licenses, urbanization or subdivision and construction permits under such terms and conditions as they deem fit, to freely cede to the Municipality of ..., namely, to the public domain, areas of land intended for roads, pavements, green areas, educational establishments, to submit and request approval of architectural projects and various specialties, as well as alterations and notes thereto, to request any certificates and to execute in any deeds to be celebrated with the Municipal Chamber of ... or with the Municipality of ..., accepting and proposing such clauses and other conditions as they deem fit; with K..., S.A. – L..., to execute contracts for the supply of electrical energy, to request work meters and alterations to the initial layouts.
– The agents may use this power of attorney to engage in transactions with themselves, pursuant to paragraph one, Article two hundred and sixty-one of the Civil Code and, consequently, may, in particular, intervene in acts in which they are interested.
– The powers contained in this power of attorney, in the terms in which they are expressed, are conferred in the interests of the agents, whereby it is irrevocable, with full legal force, pursuant to paragraph three, Article two hundred and sixty-five of the Civil Code and the powers conferred therein shall not lapse by death, interdiction or incapacity of the principals, pursuant to Article one thousand one hundred and seventy-five of the Civil Code."
– as per copy of the power of attorney attached to the initial petition as Document 6.
With the execution of the aforementioned power of attorney, a payment of €774,462.31 was made by the company B..., Lda., through the issuance of a cheque from Bank F... in favor of C..., on 27 May 2002, relating to the above-identified rural property – cf. Document 7 attached to the initial petition and document (account extract) presented later.
Both the amount paid as a deposit and part payment, of €329,206.61, and that of €774,462.31, totaling €1,103,668.92, were recorded in account #229 – Advances to suppliers, more specifically in the sub-account denominated #22912 – E... – which, following the introduction of the Accounting Standards System (SNC) in 2010, came to be shown as account #22.8.1 – as per financial documentation attached to the initial petition – Documents 7 to 24, supplemented with legible copies delivered later.
An Agreement was also executed on 27 May 2002, between, on one hand, C... and D..., referred to in this Agreement as First Parties, and, on the other hand, as Second Parties, the following individuals: G..., H..., both executing in their own right and in representation of the company B..., Lda., I... and J... – cf. copy of the Agreement attached to the initial petition (Document 25), the signed version of which was attached later (annex to the minutes of the meeting under Article 18 of the RJAT).
This Agreement was intended to regulate a set of obligations assumed by the Second Parties, individuals, repeatedly identified in the Agreement in that capacity [as individuals], before the First Parties, in the context of the irrevocable mandate conferred upon them by power of attorney. Thus, the Second Parties, "individuals, undertake before the first parties in the exercise of the mandate which they are conferred by these in the power of attorney referred to in the previous article, to execute the deed of sale of the property above identified after the approval of the granting of the request for licensing or authorization for the operation of its subdivision, or urbanization of a tourist development, of the same, transacting it as urban, within a period of 120 days from the date of such approval, which the second parties undertake to promote at their own account and exclusive risk, by preparing the necessary projects and documentation for this purpose, in which they shall use the diligence of 'a good father of the family', and communicating the execution of the act to the first parties within eight days immediately following its execution, undertaking these to sign the requests and other documentation that may prove necessary for that purpose, to present at the Municipal Chamber of ...." – cf. copy of the Agreement attached to the initial petition (Document 25), the signed version of which was attached later (annex to the minutes of the meeting under Article 18 of the RJAT).
The aforementioned Agreement further provides that the steps to obtain the licenses or authorizations and subdivision and urbanization permits, as well as the payment of taxes, duties and other associated costs, including fees for technicians involved in the preparation of the projects, shall be the responsibility of "all the second parties", referred to as "individuals", with the first parties being required to provide their collaboration, by signing the requests that may prove necessary – cf. copy of the Agreement attached to the initial petition (Document 25), the signed version of which was attached later (annex to the minutes of the meeting under Article 18 of the RJAT).
During the course of 2004, the company B..., Lda. recorded expenses in the amount of €42,000.00 relating to design services, which were recorded as "work in progress" in an inventory item, in the context of the submission of a prior information request (PIP) with the municipality, which was signed by the promise-vendors – as per financial documentation attached to the initial petition, Documents 7 to 24, supplemented with legible copies delivered later and with the testimony of the witnesses (ROC and TOC).
The company B..., Lda. was extinguished by virtue of a merger by incorporation into A..., S.A., with the global transfer to the latter of all the assets of the former, as per public deed of 29 December 2004, with retroactive effect to 1 January of the same year, expressly stating in the merger deed, by declaration of the parties, that the company "B..., Limited does not have any real property" – cf. copy of the deed attached to the initial petition as Document 26.
On 21 April 2006, the agent H... sold the rural property located at ... above identified to the company M..., Lda., which, in turn, on 25 July 2006 sold it to the company N..., Lda. – cf. Documents 27 and 28 (copies of the respective deeds), attached to the initial petition.
These sales were declared null, following a judicial action brought in 2007 by the Applicant against, among others, the agent H..., after various appeals which culminated in the final decision of the Supreme Court of Justice, on 2 June 2015, which denied the review of the Judgment of the Lisbon Court of Appeal favorable to the Applicant, and all registrations subsequent to the registration of the acquisition of the same property in favor of C... and D... were cancelled – as per copy of the sentences and judgments attached to the initial petition as Documents 29 to 31.
The Applicant incurred costs with the judicial proceedings for the invalidation of the sale of the rural property in question, including court costs and lawyer fees, which amounted to approximately €400,000.00 – as per the testimony of the witnesses (ROC) and (TOC).
On 21 March 2016, a Declaration under Model 1 of the Municipal Property Tax ("IMI"), for registration of the above-identified rural property as urban, was submitted in the name of C..., reported to the date of 26 February 2016 – cf. copy of Model 1 attached to the initial petition as Document 32.
Following the submission of Model 1, the property came to be classified as urban and was registered in the matrix of the Union of the parishes of ... and ... under item U-... – as per copy of the property notebook and the permanent certificate of the property attached to the initial petition as Documents 33 and 34.
On 17 May 2016, the Applicant proceeded to pay the IMT assessment no. ..., in the amount of €71,738.48 – cf. copy of the assessment document attached to the initial petition as Document 2.
On 18 May 2016, the Applicant acquired the above-identified property in paragraphs A and P by deed of purchase and sale – cf. copy of the deed attached to the initial petition as Document 35.
Following the acquisition of ownership of the property, the Applicant recorded the real property in accounting under the inventory account #31.1000100027 – Purchases – Merchandise – "Property ..." – as the counterpart to the cancellation of the debit balance of account #22.8.1 (former #229) relating to supplier E... – cf. Document 24 attached to the initial petition supplemented with legible copy delivered later.
On 9 September 2016, not accepting the IMT assessment due for the acquisition of the property in question, the Applicant filed an Administrative Claim with AT. The Administrative Claim was dismissed following notification of the draft decision and the exercise of the right to a hearing by the Applicant – cf. Documents 1, 36 and 37 attached to the initial petition.
On 27 October 2017, the Applicant filed a request for constitution of the Arbitral Tribunal in the CAAD computer system.
FACTS NOT PROVED AND REASONING
It was not proved that facts occurred that would constitute the "delivery of possession" of the property (the rural property located at ...), alleged in paragraph 12 of the initial petition, to the promise-purchaser company and, in its capacity as universal successor, to the company here as Applicant, whether by reference to the moment of execution of the irrevocable power of attorney on 27 May 2002, or at any other time until the execution of the public deed of acquisition of the same in 2016.
In fact, despite the fact that there was full payment of the price on 27 May 2002, coinciding with the date of execution of the aforementioned power of attorney, there is no allegation of matters that would translate into the practice of physical or symbolic acts of delivery and taking of the property by the promise-purchaser company.
A critical analysis of the irrevocable power of attorney which (less than six months after the execution of the promise contract) conferred powers for the practice of a set of legal acts relating to the property never mentions the company that is the promise-purchaser of the land, instead involving individuals who cannot in any way be confused with the entity of corporate character.
In fact, the power of attorney is conferred to four individuals, none of whom is identified as acting in representation and/or in the interests of a company.
Thus, the power of attorney confers considerable legal powers on four natural persons who are not the same as the promise-purchaser company and who act in their own name and not in representation of said company, a factuality that can only be interpreted in reinforcement of this Tribunal's conviction that the material and/or symbolic acts that could indicate or constitute the concept of delivery were not verified in the sphere of the promise-purchaser company, with the intention being, precisely, by means of that power of attorney to preclude the verification of traditio for that entity.
This understanding is also corroborated by the content of the Agreement itself which was intended to regulate the exercise of the power of attorney, according to which the second parties, agents in the aforementioned power of attorney, are always and repeatedly referred to by the phrase "individuals", even though in the Agreement (unlike the power of attorney) two parties are identified as managers and "executing in their own right and in representation of the company". However, this reference does not extend to the other two parties to the Agreement, I... and J..., who execute only in their own right and not as representatives of the promise-purchaser company.
Thus, there is, from the outset, an absence of subjective identity between those who had powers to engage in legal and material acts concerning the property in question and the promise-purchaser company.
The practice of material or symbolic acts by the agents, which, it is emphasized, is neither alleged nor proved in the file, would, in any event, be a projection of the sphere (legal and factual) of the individuals authorized to practice them under the terms of the mandate and not a material or legal act imputable to the promise-purchaser company by means of which the latter would be exercising any control over the real property asset.
Furthermore, although the agents (which, it is emphasized, are not the same as the Company here as Applicant) had powers to deal with all matters concerning the rural property in question, including those of presenting and requesting urbanization or subdivision and construction projects, it does not follow from the evidence acquired during the proceedings that they did so, with the contrary being demonstrated, namely regarding the prior information request (PIP) which was signed and submitted in the name of the promise-vendors.
Nor was it proved that the property was recorded in the accounting of the Applicant (at the time B..., Lda.), at the moment of execution of the irrevocable power of attorney and full payment of the price (paragraph 14 of the initial petition), which could reveal some animus detinendi, or even possidendi.
Conversely, what emerges from the documentary evidence produced is that the amounts paid were recorded in accounting as advances to suppliers (in class 2), that is, evidencing only a right to obtain a supply or, in other words, a right of credit to acquire the property and not as a real property asset held by the company, in which case it would have had to be recognized as inventory (in class 3) or fixed assets (class 4).
Other facts with relevance to the decision of the case were not proved, and it should be noted that, regarding factual matters, the Tribunal does not have to pronounce itself on everything that was alleged by the parties, with it being the duty to identify the subject matter of the evidence and to select the facts that matter for the decision, pursuant to the provisions of Articles 596 and 607 of the Code of Civil Procedure ("CPC"), applicable by reference from the RJAT (Article 29, paragraph 1, subsections a) and e)).
With regard to the facts proved, the conviction of the arbitrators was based on a critical analysis of the documentary evidence attached to the file. As for the testimony of the witnesses, it did not prove to be determinative.
The first and second witnesses – O..., Certified Public Accountant ("ROC") of the Applicant, and P..., Accounting Technician ("TOC") of the Applicant – stated that they have no direct knowledge of facts prior to the merger that occurred at the end of 2004. It is recalled that the Applicant alleges a delivery of possession that occurred at an earlier moment, specifically in 2002.
At the time of the merger, these two witnesses carried out a retrospective assessment of the operations and amounts reflected in the accounting of the incorporated company, since the same were to become part of the incorporating company of which they were ROC and TOC, and in this context, they pronounced themselves generally on facts provable only by documents. The TOC also noted that it carries out its activity outside the Applicant's premises, so that the source of its information is essentially documentary and it has no proximity with the decision-making and management processes of the Applicant.
The third witness, E..., identified himself as son and agent of the promise-vendors, and did not demonstrate knowledge of facts that could materialize the transfer of possession to the Applicant. He referred to the agreement, which also consists of a written document and to which this adds nothing (subsection H above), according to which the costs with the development of the property project until the deed of sale would have to be borne by the promise-purchasers, a condition not apt to configure delivery of possession, which is, moreover, contradicted by the fact that, before third parties and before public authorities, the acts of development of the property project were always practiced in the name of the still-owners.
Finally, the fact that the Applicant instituted a judicial action for declaration of nullity of the illicit transaction of sale carried out by one of the agents constitutes the exercise of a power of disposition, whose legitimacy does not derive from the quality or status of possessor of the property that the Applicant invokes, but from a substantive legal position grounded in legal acts (e.g., the promise-to-buy-and-sell contract) incapable of giving substance to and externalizing the material or symbolic action that the institute of possession requires.
OF LAW
Invalidity of the tax act due to expiry of the right to assess IMT
According to the Applicant, the fiscal transmission of the property located at ..., which later became the property development project called "..." (above identified in paragraphs A and P), occurred on 27 May 2002, by virtue of the fact that, at this moment, the essential elements for the fulfillment of the tax incidence rule contained in Article 2, §1, no. 2 of the CIMSISD, in force at that time, converged, according to which (it was then considered that) transmissions of real property rights are considered to be promises to buy and sell real property, as soon as delivery to the promise-purchaser is verified.
The elements invoked by the Applicant are:
The promise to buy and sell that had been executed on 12 December 2001;
The payment of the remainder of the price to the promise-vendors; and, finally,
The delivery of possession to the promise-purchaser B..., Lda.
Based on these premises, the Applicant argues that, at the time of the IMT assessment on 17 May 2016, which preceded the execution of the public deed of purchase and sale of this property (dated 18 May 2016), the right to such assessment had long since expired, due to the passage of the eight-year period following the transmission (fiscal), provided for in Article 92 of the CIMSISD. Thus, for the Applicant, the IMT assessment which is the subject of this arbitral action suffers from a substantive defect that invalidates it.
Taking a different view, the Respondent understands that there is no evidence, accounting or material, of the alleged delivery of possession of the property to the Applicant. Therefore, the only transmission of the property occurred in 2016, and consequently the IMT assessment is valid.
The issue to be examined and decided concerns, therefore, the disputed meeting, in the concrete case, of the requirements of the tax incidence rule provided for in Article 2, §1, no. 2 of the CIMSISD, according to which, in addition to situations of transmission of the right of ownership, real property that is the object of a promise to buy and sell is also considered to be transmitted (for taxation purposes), "as soon as delivery to the promise-purchaser is verified".
Since the execution of the promise-to-buy-and-sell contract constitutes uncontroversial factual matter, it remains to conclude whether the Applicant has managed to demonstrate the second cumulative requirement of the substantive defect it invokes, relating to the delivery of the property to its sphere, in its capacity as promise-purchaser, a burden that lies upon it pursuant to the provisions of Article 74, paragraph 1 of the General Tax Law ("LGT") and Article 342 of the Civil Code.
It is important to note that the concept of "delivery of the thing" is not exclusive to tax law and dates back to the Roman law tradition. As the Supreme Court of Justice judgment, Case 1729/12.6TBCTB-B.C1.S1, of 25 March 2014[1], from which we extract the following excerpt, emphasizes:
"The delivery of the thing expresses, in the discipline of real property rights, the transmission of the detention of a thing between two legal subjects, being constituted by a negative element (the abandonment by the former detainer) and a positive element, traditionally called apprehensio (the act that expresses the taking of power over the thing). [...]
It is in the positive element of traditio (apprehensio) that the variations occur that explain the distinction between material delivery and symbolic delivery.
Delivery is material when, for example, the bookseller hands the book to the buyer, or the seller of a house leads the buyer into it, subsequently abandoning it; it shall be symbolic when the seller of an apartment hands the keys to the buyer, or the seller of an estate hands to the buyer the titles or documents that justified its right, or, as in the old customs, handed him a portion of land of the property or, for example, a vine shoot of a vineyard.
Material delivery is, therefore, that carried out through a physical act of delivery and receipt of the thing itself; symbolic delivery is the result of the social or conventional meaning attributed to certain gestures or expressions."
Thus, whether in material delivery or in symbolic delivery, the cumulative occurrence of two elements is necessary – the abandonment by the former detainer and acts, material, physical or symbolic, on the part of the acquirer that express a taking of power over the thing. Additionally, as acknowledged by the Supreme Court of Justice judgment, Case 158/2000.L1.S1., of 1 March 2010, our law embraces the general principle that "possession is not transmitted by the mere effect of the contract", without prejudice to the fact that, as occurs with all principles, it may be subject to restrictions.
One of the possible indicators of transmission of possession is the payment of the entirety of the price (Supreme Court of Justice judgment, Case 04B1445, of 11 November 2003), which is verified in the present case. However, this element must be contextualized with other indicators, and one cannot disregard the global evaluation of a set of factors.
As Supreme Court of Justice case law emphasizes, "the signature of the promise contract is not deserving of, by itself, giving privilege to the promise-purchaser of exercising the 'corpus' and the 'animus' that make up possession over the thing promised to be sold", and the promise-purchaser appears in this legal situation as a true possessor when, for example, "acts, not in the name of the promise-vendor but in its own name (uti dominus), with the intention of exercising over the thing a true real property right" (Supreme Court of Justice judgment, Case 158/2000.L1.S1., cited above).
In light of the foregoing, it appears that the delivery referred to in Article 2, §1, no. 2 of the CIMSISD implies the exercise of acts of possession "in its own name" by the promise-purchaser. It is in its sphere that the physical and symbolic acts that constitute the delivery must be attributed.
Returning to the analysis of the factual situation under consideration, it follows that:
A promise-to-buy-and-sell contract was executed with the company B..., Lda., in December 2001;
On 27 May 2012, the promise-vendors granted an irrevocable power of attorney in favor of four individuals with powers for these, each individually, to perform a set of acts relating to the rural property promised to be sold;
Not only was the power of attorney not granted in favor of the aforementioned company, as it does not contain any mention of the same, nor of the status of managers (of the promise-purchaser company) of the individual persons to whom it confers powers. Thus, according to the content of the power of attorney, those persons, each individually, exercise in their individual capacity, those powers in their own name (and not of the company, nor in the capacity of managers thereof);
On the same date as the power of attorney, a collateral Agreement is also executed with the same four persons, an agreement that states that the first two execute in representation of the promise-purchaser company. However, according to the Agreement the other two persons act, legally, in their individual capacity.
The Agreement mentions that the projects and documents to promote the urbanistic operations on the property (then rural) continue to be signed by the promise-vendors and submitted in the name of these;
The promise-purchaser company did not recognize the acquisition of the property in its accounting, that is, it did not record any real property asset, either in fixed assets or in inventory, but merely the right to a "supply", i.e., in other words, the right to acquire the property, as the counterpart to the payment made to the promise-vendors (it is recalled that the real property asset was only recognized in the accounting of the Applicant following the transfer of ownership of the property in 2016);
The submission of requests and documents relating to the property continued to be made before administrative authorities in the name of the promise-vendors, who signed them, which, it is emphasized, would be unnecessary, since the aforementioned power of attorney conferred all powers on the agents to act – legally and materially – on the property, which reveals that despite the power of attorney conferring powers on them, they chose not to exercise them (and even if they did exercise them, it would be in their own name and not of the promise-purchaser company).
It appears that the circumstances described do not permit the deduction or inference of the delivery of the land to the Applicant, in its capacity as promise-purchaser, with reference to the year 2002, and the consequent expiry of the IMI assessment which is the subject of this action.
Furthermore, the Applicant not only failed to demonstrate elements, physical or symbolic, susceptible to being framed within the concept of delivery of the property, but revealed a set of facts that even contradict that delivery.
By way of illustration, consider the accounting recording carried out by the Applicant, which did not recognize the property as its asset, and such recognition, in accordance with the accounting principles applicable, did not depend on the transfer of the legal title (even if that is the normal case), being satisfied with the transmission of "economic ownership".
The accounting entry of an expense of 42,000 euros for a designer, which, it is noted, occurred in 2004 and not on the date of the alleged delivery in 2002, also does not correspond to an externalized action of the Applicant, in its own name, on the property capable of indicating possession of the same. Consider the illustrative parallelism with the situation of a tenant who carries out improvements on the leased property and records the corresponding charges in its accounting, this fact not signifying any act of possession relative to the property.
The promise-vendors continued to be the signatories of the requests and documents relating to the property, and there were four agents who were managers of the Applicant, who could have done so and, in fact, did not. There are thus no material or physical manifestations of possession by the Applicant.
It is further important to emphasize that, at the time of the merger that occurred in 2004, two years after the date on which the alleged delivery of the property would have taken place, both the Applicant, in its capacity as incorporating company, and the promise-purchaser company (the company to be incorporated), declared in the deed that the latter did not have "any real property".
With regard to the institution of a judicial action to invalidate the illicit transaction of sale of the property by one of the agents, the reason for being and the legitimacy of the same does not derive from, nor indicate, possession. This procedural action is rooted in the right that pertains to the Applicant in its capacity as promise-purchaser (the right to acquire the property resulting from the promise-to-buy-and-sell contract) without connection to (one might say even unrelated to) the concept of possession or the status of possessor.
Finally, as emphasized above, the irrevocable power of attorney which constitutes the main pillar of the Applicant's argumentation, in that it provides for multiple and substantial material and disposal powers relating to the property here in question, is granted in favor of four individual persons and not of the promise-purchaser company, whereby its execution could not have the virtue of being an act of delivery of the property to that company, due to manifest lack of subjective identity.
Having regard to the foregoing, the invoked defect of expiry alleged by the Applicant is without merit, since it has failed to demonstrate the delivery of the property. Thus, the first and only fiscally relevant transmission of the property occurs with the execution of the public deed of purchase and sale in 2016, whereby the defect of expiry of the right to assess IMT is not verified.
It is concluded that the dismissal of the Administrative Claim filed against the IMT assessment act and, likewise, the very act of IMT assessment do not suffer from the invalidating defect (of expiry of the right to assess) invoked by the Applicant, whereby the request for declaration of illegality and annulment of these acts is without merit.
Reimbursement of the tax paid plus compensatory interest
The Applicant petitions, as a consequence of the invoked voidability of the IMT assessment act, reimbursement of the tax paid plus compensatory interest.
However, having this Tribunal concluded that the request for declaration of illegality and annulment of the tax act is without merit, there is no ground for reimbursement of the tax paid.
Furthermore, it should be noted that, with regard to compensatory interest, these are only due when there is payment of an unduly paid tax liability and it is determined that there was error attributable to the services, as provided for in Article 43, paragraph 1 of the General Tax Law ("LGT"), conditions which, in the situation at hand, are not met.
There is thus no violation of the substantive legal situation that could ground the claims for reimbursement of the tax paid and compensation by means of compensatory interest filed by the Applicant.
DECISION
Having regard to the foregoing, the arbitrators of this Arbitral Tribunal agree to render judgment dismissing in full the request for arbitral decision, with the legal consequences thereof.
* * *
The value of the case is fixed at €71,738.48 in accordance with the provisions of Articles 3, paragraph 2 of the Regulation of Costs in Tax Arbitration Proceedings ("RCPAT"), 97-A, paragraph 1, subsection a) of the Tax Procedure Code ("CPPT") and 306, paragraphs 1 and 2 of the Code of Civil Procedure ("CPC"), the latter by reference to Article 29, paragraph 1, subsection e) of the RJAT.
Costs in the amount of €2,448.00 to be borne by the Applicant, in accordance with Table I annexed to the RCPAT, and with the provisions of Articles 12, paragraph 2 of the RJAT, 4, paragraph 5 of the RCPAT and 527, paragraphs 1 and 2 of the Code of Civil Procedure ("CPC"), by reference to Article 29, paragraph 1, subsection e) of the RJAT.
Lisbon, 15 May 2018
[Text prepared by computer, pursuant to Article 131, paragraph 5 of the Code of Civil Procedure ("CPC"), applicable by reference to Article 29, paragraph 1, subsection e) of the RJAT. The drafting of this decision follows the spelling in effect before the 1990 Orthographic Agreement]
The Arbitrators,
Alexandra Coelho Martins
Fernando Borges Araújo
Nuno Maldonado Sousa
[1] Which, in turn, refers to another Supreme Court of Justice judgment (published in the Journal of Legislation and Case Law no. 133, pp. 367 et seq.).
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