Process: 577/2015-T

Date: March 3, 2016

Tax Type: IMT

Source: Original CAAD Decision

Summary

CAAD Process 577/2015-T addresses a critical issue in Portuguese tax law regarding IMI (Municipal Property Tax) exemptions for tourist properties under Article 47 of the Tax Benefits Statute (EBF). Eight claimants, primarily foreign residents from China and South Africa, challenged IMI assessments totaling €2,019.89 for 2014, arguing they should benefit from the 7-year IMI exemption applicable to properties with recognized tourist utility. The claimants purchased autonomous units within an established tourist enterprise that had previously been granted tourist utility status and IMI exemption. The central legal question is whether the IMI exemption under Article 47 EBF is objective (attached to the property itself) or subjective (linked to the specific taxpayer who installed the enterprise). The claimants argued that the exemption follows the property regardless of ownership changes, that the tourist utility had not been revoked, and that their units remained in tourist operation. The tax authority (AT) contended that the arbitral tribunal lacked jurisdiction over exemption recognition matters and argued that the exemption is tied to the initial installation of the tourist enterprise, requiring a timely exemption request that cannot be dissociated from installation. AT emphasized that subsequent purchasers who acquire units for operation rather than installation cannot claim the exemption independently. This case has significant implications for foreign investors in Portuguese tourist real estate and the plural ownership structure common in tourist developments, particularly regarding whether tax benefits transfer automatically with property sales or require new administrative procedures for each owner.

Full Decision

ARBITRAL DECISION

I. Report

  1. A…, taxpayer number…, divorced, resident at…, no.…, … …, …, …, People's Republic of China;

  2. B…, taxpayer number…, married, resident at…, …, …, district of…, Beijing, People's Republic of China;

  3. C…, taxpayer number…, married, resident at…, …, …, …, …, …, district of…, Xiamen, People's Republic of China;

  4. D…, taxpayer number…, married, resident at … …, …, …, …, People's Republic of China;

  5. E…, taxpayer number…, married, resident at … …, …, …, …, Hangzhou, People's Republic of China;

  6. F… UNIPESSOAL, LDA., company with registered office at Rua…, no.…, … floor…, Alfeizerão, registered at the Commercial Registry Office under the single registration number and legal person number…;

  7. G…, taxpayer number…, married, resident at…, …, South Africa; and

  8. H…, taxpayer number…, married, resident at…, …, …, Henan Province, People's Republic of China;

(hereinafter, the "Claimants")

filed a request with the Administrative Arbitration Center (CAAD) on 1 September 2015 for the constitution of an arbitral tribunal in tax matters, pursuant to the provisions of article 10, nos. 1 and 2 of Decree-Law no. 10/2011, of 20 January (Legal Framework for Tax Arbitration "RJAT"), in which the Tax and Customs Authority (AT) is the Respondent, with a view to declaring the illegality and consequent annulment of the following Municipal Property Tax (IMI) assessment acts, relating to the year 2014, corresponding to the following documents no.:

i. 2014…, of 28.02.2015, in the amount of €211.88 (two hundred and eleven euros and eighty-eight cents), issued in the name of Claimant A…;

ii. 2014…, of 28.02.2015, in the amount of €207.84 (two hundred and seven euros and eighty-four cents), issued in the name of Claimant B…;

iii. 2014…, of 28.02.2015, in the amount of €207.84 (two hundred and seven euros and eighty-four cents), issued in the name of Claimant C…;

iv. 2014…, of 28.02.2015, in the amount of €219.95 (two hundred and nineteen euros and ninety-five cents), issued in the name of Claimant D…;

v. 2014…, of 28.02.2015, in the amount of €171.86 (one hundred and seventy-one euros and eighty-six cents), issued in the name of Claimant E…;

vi. 2014…, of 28.02.2015, in the amount of €171.86 (one hundred and seventy-one euros and eighty-six cents), issued in the name of Claimant E…;

vii. 2014…, of 08.04.2015, in the amount of €173.21 (one hundred and seventy-three euros and twenty-one cents), issued in the name of Claimant F… Unipessoal Lda.;

viii. 2014…, of 26.05.2015, in the amount of €435.66 (four hundred and thirty-five euros and sixty-six cents), issued in the name of Claimant G…; and

ix. 2014…, of 09.04.2015, in the amount of €219.79 (two hundred and nineteen euros and seventy-nine cents), issued in the name of Claimant H…;

in the aggregate amount of €2,019.89 (two thousand and nineteen euros and eighty-nine cents).

The Claimants opted not to appoint an arbitrator.

The request for constitution of an arbitral tribunal was accepted by the President of CAAD on 3 September 2015 and was automatically notified to AT on the same date.

The Signatory was appointed by the President of the Deontological Council of CAAD as arbitrator of a sole arbitral tribunal, pursuant to the provisions of article 6 of RJAT, having communicated acceptance of the appointment within the legal deadline, in accordance with the provisions of article 4 of CAAD's Deontological Code.

The Parties were notified of the appointment of the Signatory on 3 November 2015, pursuant to article 11, no.1, paragraphs a) and b) of RJAT, and did not object to it.

The sole arbitral tribunal was thus properly constituted on 17 November 2015, in accordance with the provisions of paragraph c) of no.1 of article 11 of RJAT.

AT was notified, by arbitral order of 20 November 2015, to submit its response within a period of 30 (thirty) days.

AT submitted its response on 1 February 2016.

The Claimants submitted a motion to the case on 11 February 2016, which was, by order of 13 February 2016, joined to the case, as it constitutes an exercise of the right to reply to the exception raised by the Respondent in its Response.

By order of 20 February 2016, the Arbitral Tribunal considered, pursuant to article 16, paragraphs c) and e) of RJAT, that the meeting provided for in article 18 of RJAT was dispensable and that the case was ready for decision. The date of 14 March 2016 was further set for the pronouncement of the arbitral decision.

The Parties have legal personality and capacity and are entitled to sue (articles 4 and 10, no. 2 of RJAT and article 1 of Ordinance no. 112-A/2011, of 22 March).

The joinder of claimants is admissible, as well as the cumulation of claims, since the requirements established in article 3, no. 1 of RJAT are met.

The case has no defects that invalidate it.

II. Claimants' Claim

The Claimants presented a claim seeking an arbitral pronouncement with a view to declaring the illegality and consequent annulment of the IMI assessment acts relating to the year 2014, identified above, the reimbursement of the tax amounts paid under such assessment acts, and the payment of compensatory interest.

They allege, in summary, that:

i. They acquired autonomous units in a tourist enterprise in joint ownership to which tourist utility was granted;

ii. Such qualification permits obtaining certain tax benefits, namely exemption from Municipal Property Tax (IMI) for a period of 7 (seven) years, in accordance with article 47 of the Tax Benefits Statute (EBF);

iii. The recognition of the exemption in question was requested by the owner of the tourist enterprise (and seller of the autonomous units thereof to the Claimants), following the grant of tourist utility, to the Finance Department of…, which granted such request;

iv. The IMI exemption thus defined is an objective exemption and not a subjective one, that is, it follows the property and does not concern the respective taxpayer;

v. The tourist utility of the enterprise has not been revoked and there exists no cause that could determine its revocation;

vi. The autonomous units of the Claimants were not withdrawn from tourist operation;

vii. The mere purchase and sale of autonomous units forming part of tourist enterprises does not constitute a withdrawal from integrated tourist operation;

viii. The IMI exemption should thus be recognized for the autonomous units in question, the purchase and sale effected having no impact on such exemption;

ix. Notwithstanding the foregoing, the Claimants were notified of the IMI assessments in dispute, which they paid, but which they consider illegal, requesting their annulment;

x. They further request reimbursement of the amounts paid and the payment of compensatory interest.

III. Respondent's Reply

In its response, the Respondent alleges, in summary, that:

i. The Arbitral Tribunal has no jurisdiction to determine matters relating to the recognition of exemptions, indicating that this is an exception to jurisdiction that may be raised of its own motion;

ii. The Respondents acquired autonomous units in a tourist enterprise that was already installed. The units were thus acquired with a view to operation and not to the installation of a tourist enterprise;

iii. The recognition of the exemption contained in article 47 of the EBF is dependent on recognition conditional on the submission of a request within a certain period (which cannot be dissociated from the installation of the enterprise);

iv. There is no provision for any other deadlines beyond this period for requesting the exemption, from which it follows that this exemption is associated with the installation of the enterprises;

v. Pursuant to Decree-Law no. 423/83 of 5 December, the emphasis of tax exemptions concerns the purpose for which the units were acquired;

vi. As stated in Jurisprudence-Unifying Judgment no. 3/2013 of 23 January, of the Supreme Administrative Court, the legislator intended to grant incentive only to acquisitions of real property with the objective of installing enterprises qualified as having tourist utility;

vii. In tourist enterprises in joint ownership, two procedures must be distinguished: that of installation and that of operation, into which the sale of autonomous units falls;

viii. Thus, the IMI exemption has no justification for all those who use and operate the tourist enterprise, namely through the purchase of autonomous units therein;

ix. Additionally, pursuant to article 15 of the EBF, tax benefits are not transmissible inter vivos, so the exemption granted to the promoter of the enterprise cannot be transmissible to the Claimants;

x. Finally, compensatory interest would only be due if the challenged act resulted in tax superior to that due, which is not the case;

xi. The exception of lack of jurisdiction raised should be considered well-founded, and if not so considered, all matter of the claim relating to the recognition of the exemption should be severed.

IV. Issues to be Decided

Considering the facts and the law contained in the claim for arbitral pronouncement presented by the Claimant and the response of the Respondent, the issues to be decided by the Arbitral Tribunal are:

  1. Whether autonomous units in a tourist enterprise in joint ownership acquired by the Claimants may benefit from the IMI exemption arising from the classification of tourist utility granted to the enterprise and requested by its promoter;

  2. If so, that is, if the arbitral claim is found to be well-founded, whether the Claimants shall be entitled to compensatory interest on the amount of tax already paid.

Without prejudice to the foregoing, and before determining the issues indicated above, the Arbitral Tribunal must determine the exception of lack of material jurisdiction raised by the Respondent, which shall be done below.

The Exception of Lack of Material Jurisdiction

Article 2, no.1 of RJAT provides that the jurisdiction of arbitral tribunals comprises the determination of the following claims:

a. The declaration of illegality of tax assessment acts, self-assessment acts, withholding at source acts and payment on account acts; and

b. The declaration of illegality of acts fixing taxable matter when it does not give rise to the assessment of any tax, of acts determining taxable matter and of acts fixing patrimonial values.

Now, there can be no doubt, in the case in question, that what is being discussed are the acts assessing IMI. That is, acts assessing taxes.

There exists, in truth, no administrative act of recognition or revocation of exemptions or other tax benefits that is being challenged – acts that are outside the jurisdiction of arbitral tribunals. An act of recognition of tax benefits shall not be appreciated. Those acts already exist in the legal system (the order granting tourist utility by the State Secretary for Tourism and the recognition of the exemption by the Head of the Finance Department of …) and are not being discussed.

The substance of the issue to be decided is different – it is whether the IMI assessment notified to the Claimants is or is not legal, in light of the applicable legal provisions, which establish a tax benefit, in this case, IMI exemption.

Thus, it is reiterated, no act of recognition or revocation of tax benefits shall be appreciated. Rather, in the wake of many other cases already decided in arbitral tribunal, an act of tax assessment that presupposes the interpretation of norms relating to tax benefits shall be appreciated.

This Arbitral Tribunal considers, consequently, that it has jurisdiction to determine the arbitral claim.

V. Factual Matters

With relevance to the determination of the Claimants' claim, the following facts are found to be proven, based on the documents attached to the case and not disputed by the Respondent:

  1. Between November 2013 and September 2014, the Claimants acquired autonomous units intended for tourist accommodation and forming part of the tourist enterprise "I…", as follows:
Claimant Acquisition Date Autonomous Unit
A… 26 November 2013 "AS"
B… 23 December 2013 "AX" and "X"
C… 23 December 2013 "AX" and "X"
D… 29 April 2014 "G"
E… 1 April 2014 "Y"
F…, Unipessoal, Lda 18 September 2014 "D"
G… 19 September 2014 "AF"
H… 17 October 2014 "H"

  1. The selling entity of such autonomous units was J…, S.A. (hereinafter, "J"), owner of the tourist enterprise in question;

  2. The tourist enterprise was granted tourist utility definitively, by order of the State Secretary for Tourism no. …/2010, of … December 2010, published in the Official Journal (Diário da República), 2nd series, of … December 2010;

  3. Tourist utility was granted for 7 (seven) years, between 19 July 2010 and 19 July 2017;

  4. Tourist utility was requested by J…;

  5. J… requested from the Finance Department of…, on 7 January 2011, the recognition of the IMI exemption resulting from the grant of tourist utility;

  6. Such request was granted by order of 10 January 2011, for a period of 7 (seven) years, between 2010 and 2016 (inclusive);

  7. The tourist enterprise is operated by J...;

  8. The autonomous units acquired were not withdrawn from tourist operation, in that they remain designated for tourist purposes and, according to the public deeds of purchase and sale thereof and other elements attached to the case, a periodic fee is paid to the entity operating and administering the enterprise;

  9. Claimant H… communicated on 26 February 2015 to Tourism of Portugal, IP, the change of ownership of unit H, which she acquired on 17 October 2014;

  10. Tourism of Portugal IP sent a copy of the communication and the order thereon to the Finance Department of…;

  11. The Finance Department of … granted the IMI exemption with respect to the autonomous unit H acquired by Claimant H… for the years 2015 and 2016, considering that the deadline for communication to Tourism of Portugal IP established in Decree-Law no. 423/83, of 5 December, had not been met;

  12. The Claimants were notified, respectively, of the following acts assessing Municipal Property Tax (IMI), relating to the year 2014, corresponding to the documents no., and which were paid by each Claimant:

i. 2014…, of 28.02.2015, in the amount of €211.88 (two hundred and eleven euros and eighty-eight cents), issued in the name of Claimant A… already paid;

ii. 2014…, of 28.02.2015, in the amount of €207.84 (two hundred and seven euros and eighty-four cents), issued in the name of Claimant B… already paid;

iii. 2014…, of 28.02.2015, in the amount of €207.84 (two hundred and seven euros and eighty-four cents), issued in the name of Claimant C… already paid;

iv. 2014…, of 28.02.2015, in the amount of €219.95 (two hundred and nineteen euros and ninety-five cents), issued in the name of Claimant D… already paid;

v. 2014…, of 28.02.2015, in the amount of €171.86 (one hundred and seventy-one euros and eighty-six cents), issued in the name of Claimant E… already paid;

vi. 2014…, of 28.02.2015, in the amount of €171.86 (one hundred and seventy-one euros and eighty-six cents), issued in the name of Claimant E… already paid;

vii. 2014…, of 08.04.2015, in the amount of €173.21 (one hundred and seventy-three euros and twenty-one cents), issued in the name of Claimant F… Unipessoal Lda. already paid;

viii. 2014…, of 26.05.2015, in the amount of €435.66 (four hundred and thirty-five euros and sixty-six cents), issued in the name of Claimant G… already paid; and

ix. 2014…, of 09.04.2015, in the amount of €219.79 (two hundred and nineteen euros and seventy-nine cents), issued in the name of Claimant H…, already paid.

The conviction concerning the facts found to be proven was based on the documentary evidence attached by the Parties, whose authenticity and correspondence to reality were not questioned.

There exist, with relevance to the case, no other facts that are not considered proven.

VI. Legal Matters

For the determination of the issues to be decided, consideration must be given, first of all, to the provisions of article 47 of the EBF, which, under the heading "Real property forming part of enterprises to which tourist utility has been granted", provides as follows:

  1. Real property forming part of enterprises to which tourist utility has been granted shall be exempted from municipal property tax for a period of seven years.

  2. Real property forming part of enterprises to which tourist utility has been granted provisionally shall benefit from the exemption provided for in the preceding number, from the date of the grant of tourist utility, provided that the deadline fixed for opening or reopening the enterprise to the public or for the completion of works has been observed.

  3. Urban real property designated for tourism accommodation benefit from exemption from municipal property tax for a period of seven years counted from the completion of the respective works.

  4. In the cases provided for in this article, the exemption is recognized by the head of finance of the area where the real property is located, upon request duly documented, which must be submitted by the taxpayers within 60 days counted from the date of publication of the order granting tourist utility.

  5. If the request is submitted after the deadline referred to in the preceding number, the exemption shall commence from the year immediately following, inclusive, that of its submission, ceasing, however, in the year in which it would have ended, had the request been submitted in time.

  6. In all matters not regulated in this article or in the Code of Municipal Property Tax, the provisions of Decree-Law no. 423/83, of 5 December, shall apply, with the necessary adaptations.

Thus, it appears to result from the rule indicated, and with relevance to the case in question, that:

a. Real property forming part of an enterprise to which tourist utility has been granted shall be exempted from IMI for 7 (seven) years;

b. The exemption must be recognized by the head of finance of the area where the real property is located;

c. The recognition is triggered by a request submitted by the taxpayers within 60 days counted from the publication of the order granting tourist utility.

Such procedure was, as appears from the facts found to be proven, complied with by J…, so there exists no doubt as to it and its requirements.

The issue arises, then, in the subsequent transfer of autonomous units forming part of a tourist enterprise in joint ownership. Is the benefit directly resulting from tourist utility maintained or not when there is a change in the owner of autonomous units of the enterprise, as long as such does not constitute a withdrawal of the same from tourist operation?

To answer the issue raised, it appears to be necessary to examine Decree-Law no. 423/83 of 5 December (as required by no. 6 of article 47 of the EBF). And this must be done also considering the provisions of Decree-Law no. 485/88, of 30 December, which revoked the tax benefits relating to industrial contribution and complementary tax (sections A and B) established in that Decree-Law no. 423/83 (and not all the benefits contained in articles 16 to 27 thereof, as confirmed by the Supreme Administrative Court, in Judgment of 16.12.2009).

That statute, already old by the standards of national legislation, lacking updating and adaptation to the current context and normative framework, allows us to understand the institute of tourist utility. According to it, "tourist utility consists in the qualification granted to tourist enterprises that satisfy the principles and requirements defined in this statute and its regulatory provisions".

From this a first fundamental element already emerges: tourist utility is granted to tourist enterprises – not to persons (natural or legal). Article 47, no.1 of the EBF, this Tribunal understands, reaffirms this principle when it defines the IMI exemption for real property forming part of enterprises that have this qualification. That is, the benefits are, apparently, objective.

Who requests the qualification of tourist utility? Pursuant to article 32, no.1 of Decree-Law no. 423/83 of 5 December, the company owning the enterprise and/or the company operating it. This was complied with in the case, the entity that requested tourist utility was J…, the entity owning and operating the enterprise.

What are the benefits resulting from this qualification? Examining the tax benefits defined in Decree-Law no. 423/83 of 5 December, it is noted that they may be, essentially, divided into two groups, namely:

a. Benefits relating to the ownership and operation of the tourist enterprise;

b. Benefits relating to the installation of the tourist enterprise.

In the first group shall be included the exemption or reduction of fees due for licences, to civil governments and to the General Directorate of Entertainment (article 16, no.1, paragraph b), whose scope and deadline depend on what is fixed in the order granting tourist utility, by force of no.4 of the same article).

In the second group, is included the exemption from Transfer Tax on Immovable Property ("IMT") and the reduction to one-fifth of Stamp Tax, in both cases, when due on the acquisition of real property for the installation of enterprises qualified as having tourist utility, granted automatically.

The answer to the issue being examined by the Arbitral Tribunal shall depend, thus, on the group in which the benefit contained in article 47 of the EBF is considered to be inserted - which, it is reiterated, necessarily results from tourist utility.

For this Tribunal the answer is clear: the benefit is applicable to real property forming part of tourist enterprises. Now, if the real property is already, as expressly stated in the letter of the law, forming part of the enterprises, such means, conversely, that the installation phase of such enterprises has already been exceeded. The benefit contained in article 47 of the EBF is framed, thus, undoubtedly, in the first group identified above, that is, it relates to the ownership and operation of the enterprise.

This is to say that the argument presented by the Respondent regarding the inseparability of the IMI exemption benefit from the installation of the enterprise does not hold.

The law provides a peremptory deadline for the submission of a tourist utility request (6 months counted from the date of opening to the public of the enterprise - article 13, no.1 of Decree-Law no. 423/83 of 5 December). If this qualification is, consequently, granted to the enterprise, such shall determine the direct application of the benefits inherent to it, whether they relate to the installation of the enterprise (in the context of IMT and Stamp Tax) or to the ownership and operation (fees due for licences and IMI).

Thus, the benefits resulting from tourist utility, such as IMI, are immediate, although subject to a request for recognition with the competent finance service. This fact does not deprive them of this immediate character, since such recognition is precisely that, a mere formal communication, not subject to any discretionary assessment and, therefore, almost automatically granted, as was the case here. The recognition is, thus, only subject to a request submitted within a certain deadline - 60 days counted from the publication of the order granting tourist utility. If recognition is requested outside that deadline, the law does not even determine loss of benefits: it merely establishes that they shall only be applicable from the following year, with the benefit lapsing in the year of the request submitted outside the deadline.

Thus, the citation by the Respondent of the Jurisprudence-Unifying Judgment no. 3/2013 of 23 January, of the Supreme Administrative Court, does not apply to the case in question – this Judgment addresses clearly and manifestly, exclusively, the IMT exemption, which, as the rule itself indicates, applies only to the acquisition of real property for the installation of tourist enterprises and not to any subsequent transfer, an interpretation which is naturally accepted.

In conclusion, the benefit of IMI exemption granted to real property forming part of tourist enterprises relates, clearly, to the ownership and operation of the enterprise, and not merely to its installation.

There being no doubt in the case that (i) this benefit exists and was granted to the entity owning and operating the enterprise, (ii) the benefit refers to the ownership and operation of the enterprise, being perfectly separable from its installation, the next issue to consider is whether it is possible for a third party acquiring an autonomous unit forming part of a tourist enterprise to benefit from it.

And it is here that the disagreement exists between Claimants and Respondent. According to the Claimants, third parties acquiring autonomous units forming part of tourist enterprises may benefit from the IMI exemption; for the Respondent (although not stating this expressly, but resulting from its argument) only the entity that initially requests tourist utility may benefit from this exemption.

A first analysis of the issue would lead us, without more, to consider that the answer is affirmative. If the benefit of IMI exemption was recognized by the competent finance service, and if it is granted to real property forming part of tourist enterprises, regardless of its owner - the rule contained in article 47 of the EBF does not, at any point, concern the ownership of the property - then it would be said that there would remain no doubt as to the fact that the subsequent transfer of an autonomous unit of a tourist enterprise in joint ownership would not entail any alteration to the benefit in effect.

Moreover, such a fact does not constitute any transfer inter vivos of tax benefits, not permitted, as the Respondent claims. The tax benefit in question is not transferred; it is rather associated with the enterprise itself and with the real property in which it is inserted. The benefit follows the real property, it is objective, not being, therefore, intuitu personae. Thus, no act is necessary for the new owner to benefit from it.

It remains, finally, to consider the provisions of article 31, no.1 of Decree-Law no. 423/83 of 5 December, which provides that "In the event of substitution of the company owning or operating the enterprise to which tourist utility has been granted, the same must be communicated to the General Directorate of Tourism within a period of 2 months, counted from the occurrence of such fact, under penalty of the new holder not being able to avail itself of the effects of the grant of tourist utility".

Can the transfer of ownership of an autonomous unit forming part of a tourist enterprise fall within the provision of that legal rule? The Tribunal understands that it does not. The rule refers to the enterprise and not to the owners of the real property in which it is inserted.

As appears from article 2, no.1 of the Legal Framework for Tourist Enterprises, contained in Decree-Law no. 39/2008 of 7 March, "Tourist enterprises are considered to be establishments intended to provide accommodation services, for payment, having at their disposal, for their operation, an adequate set of structures, equipment and complementary services."

This means that, in relation to an establishment of this type (considered as a universality of assets and rights, the set of corporeal and incorporeal things, duly organized for the provision of accommodation services), we can find three types of entities:

a. The entity owning the establishment;

b. The entity operating the establishment;

c. The entity or entities owning the real property in which the establishment is inserted.

This multiplicity has existed for decades in our legal system, it sufficing, by way of mere example, to note Decree-Law no. 435/82, of 30 October, which established the management and classification rules for tourist villages, prior even to Decree-Law no. 423/83 of 5 December. In that statute "the individual rights of the owners of the various accommodation units are guaranteed, providing for their removal from integrated tourist management, without prejudice to proper apportionment of overall charges for infrastructure and basic services of necessary use, to be defined by supplementary criteria fixed by law, in the absence of agreement between the interested parties". Its article 4 already established that:

"1. The management unit of the tourist village does not prevent the ownership of the various accommodation units existing therein by a plurality of legal entities.

  1. When the accommodation units are not owned by the operating entity, the right to operate the units for tourism must be set out in a written contract.

  2. The removal of one or more accommodation units from the operation and marketing of the village does not prejudice its qualification as such, save if, by that fact, there ceases to exist the minimum number of 100 beds in operation."

It is thus verified that the legislator always assumed this possibility, never having required that the ownership of the real property in which the enterprise is inserted be coincident with the ownership of the establishment (that is, the universality of assets and rights) tourist enterprise.

In fact, if one examines the application forms for the grant of tourist utility available on the website of Tourism of Portugal, IP[1], one can confirm this very thing, in that information is requested on these three entities, should they not coincide.

In light of the foregoing, the transfer of ownership of an autonomous unit forming part of a tourist enterprise does not fall within the provision of article 31, no.1 of Decree-Law no. 423/83 of 5 December, so it is not necessary to communicate to Tourism of Portugal, IP, for the purposes in question, the transfer of ownership of autonomous units forming part of tourist enterprises.

In conclusion, the IMI assessment acts are considered illegal, in that they disregard the exemption from which the real property benefits until 2016.

VII. Compensatory Interest

Following the finding that the 2014 IMI assessments in question are illegal, and given that the Claimants paid the respective tax, as per the documents attached to the case, the Claimants have the right, in accordance with articles 24, no. 1, paragraph b) of RJAT and 100 of the General Tax Code, to reimbursement of the tax improperly paid.

As for compensatory interest, article 43 of the General Tax Code stipulates that "compensatory interest is due when it is determined, in an administrative appeal or judicial challenge, that there was an error attributable to the services from which resulted payment of the tax debt in an amount superior to that legally due". As to the existence, in the case, of an error attributable to the services, such error is considered to exist, in that the claim of illegality of the assessments is well-founded. As to the amount paid, it is undoubtedly superior to that which would be due in this situation.

Consequently, the Claimants have the right to compensatory interest, pursuant to articles 43, no. 1 of the General Tax Code and 61, nos. 2 and 5 of the Tax Procedural Code, on all amounts paid, counted from the date of improper payment until its complete reimbursement.

VIII. Decision

In these terms, and based on the grounds set forth, the Arbitral Tribunal decides:

A. To find the arbitral claim entirely well-founded, with the consequent annulment of the acts assessing Municipal Property Tax (IMI), relating to the year 2014, corresponding to the documents no.:

i. 2014…, of 28.02.2015, in the amount of €211.88 (two hundred and eleven euros and eighty-eight cents), issued in the name of Claimant A…;

ii. 2014…, of 28.02.2015, in the amount of €207.84 (two hundred and seven euros and eighty-four cents), issued in the name of Claimant B…;

iii. 2014…, of 28.02.2015, in the amount of €207.84 (two hundred and seven euros and eighty-four cents), issued in the name of Claimant C…;

iv. 2014…, of 28.02.2015, in the amount of €219.95 (two hundred and nineteen euros and ninety-five cents), issued in the name of Claimant D…;

v. 2014…, of 28.02.2015, in the amount of €171.86 (one hundred and seventy-one euros and eighty-six cents), issued in the name of Claimant E…;

vi. 2014…, of 28.02.2015, in the amount of €171.86 (one hundred and seventy-one euros and eighty-six cents), issued in the name of Claimant E…;

vii. 2014…, of 08.04.2015, in the amount of €173.21 (one hundred and seventy-three euros and twenty-one cents), issued in the name of Claimant F… Unipessoal Lda.;

viii. 2014…, of 26.05.2015, in the amount of €435.66 (four hundred and thirty-five euros and sixty-six cents), issued in the name of Claimant G…; and

ix. 2014…, of 09.04.2015, in the amount of €219.79 (two hundred and nineteen euros and seventy-nine cents), issued in the name of Claimant H…;

in the aggregate amount of €2,019.89 (two thousand and nineteen euros and eighty-nine cents).

B. To condemn the Respondent, pursuant to paragraph b) of no. 1 of article 24 of RJAT, to restore the situation that would have existed if the annulled assessment acts had not been made, adopting the acts and operations necessary for that purpose, through the restitution of the amounts of tax improperly paid and the payment of the corresponding compensatory interest, counted from the date of improper payment until its complete reimbursement.

Value of the case: €2,019.89 (two thousand and nineteen euros and eighty-nine cents)

Costs: Pursuant to the provisions of article 22, no. 4 of RJAT, and in accordance with Table I annexed to the Regulation of Costs in Tax Arbitration Cases, the value of costs is set at €612.00 (six hundred and twelve euros), payable by the Respondent.

Lisbon, 3 March 2016

The Arbitrator

Ana Pedrosa Augusto

[1] http://www.turismodeportugal.pt/portugués/areasatividade/dvo/utilidade-turistica/pages/utilidade-turistica-efetuar-pedidos.aspx

Frequently Asked Questions

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What is the IMI tax exemption for properties classified as tourist utility under Article 47 of the EBF?
Article 47 of the Tax Benefits Statute (EBF) provides a 7-year exemption from IMI (Municipal Property Tax) for properties classified with tourist utility as part of a tourist enterprise (empreendimento turístico). This exemption is granted following the recognition of tourist utility by the competent tourism authority. The key legal debate centers on whether this exemption is objective (attached to the property itself) or subjective (linked to the original owner who installed the enterprise). The exemption is intended to incentivize investment in tourism infrastructure and requires that the property maintain its tourist utility classification and remain in tourist operation throughout the exemption period.
Can individual owners in a plural ownership tourist development claim IMI exemption in Portugal?
Individual owners in a plural ownership tourist development face legal uncertainty regarding IMI exemption claims in Portugal. While claimants argue that the exemption under Article 47 EBF is objective and should follow the property regardless of ownership structure, the tax authority contends that the exemption is linked to the initial installation of the tourist enterprise and requires a timely exemption request. Subsequent purchasers of autonomous units in an already-established tourist development may not automatically inherit the exemption. The resolution of this issue depends on whether courts interpret the exemption as attached to the property's tourist utility status or to the original developer who installed the enterprise. Individual owners may need to file separate exemption requests or demonstrate continuity of tourist operation.
How does the CAAD arbitral tribunal handle disputes over IMI assessments on tourist properties?
The CAAD (Administrative Arbitration Center) handles IMI assessment disputes on tourist properties through a streamlined arbitral process. Property owners can file a request for arbitration under Decree-Law 10/2011 (RJAT) without needing to appoint their own arbitrator in sole arbitrator cases. The process involves: (1) filing the arbitration request identifying the contested IMI assessments; (2) appointment of an arbitrator by CAAD's Deontological Council; (3) notification to the tax authority to submit its response within 30 days; (4) possible reply by claimants; (5) decision on whether oral hearings are necessary; and (6) issuance of the arbitral decision. The tribunal can declare assessments illegal and order reimbursement plus compensatory interest. However, jurisdictional issues may arise if the dispute concerns recognition of tax exemptions rather than mere assessment correctness.
What are the requirements for a tourist development (empreendimento turístico) to qualify for IMI exemption under Portuguese tax law?
To qualify for IMI exemption under Portuguese tax law, a tourist development must: (1) obtain official recognition as a tourist enterprise (empreendimento turístico) from the competent tourism authority; (2) be granted tourist utility status; (3) file a timely exemption request with the tax authority following the installation of the enterprise; and (4) maintain the property in tourist operation throughout the exemption period. The tax authority argues that the exemption is intrinsically linked to the installation phase and cannot be dissociated from it, meaning that subsequent purchasers who acquire units for operation rather than installation may not qualify. The tourist utility must not be revoked, and the property must continue serving its designated tourism purpose. The exemption duration is 7 years from recognition.
How can foreign property owners in Portugal challenge IMI tax assessments through tax arbitration at the CAAD?
Foreign property owners in Portugal can challenge IMI tax assessments through the CAAD (Centro de Arbitragem Administrativa) by filing a request for tax arbitration under the Legal Framework for Tax Arbitration (RJAT - Decree-Law 10/2011). The process is accessible to non-resident taxpayers, as demonstrated by Process 577/2015-T involving Chinese and South African residents. Owners must: (1) identify the specific IMI assessment acts being contested with document numbers and amounts; (2) file the arbitration request within the legal deadline; (3) pay any applicable arbitration fees; (4) present legal arguments supporting the illegality of the assessments; and (5) optionally choose to appoint their own arbitrator or allow CAAD to appoint one. Foreign owners can seek annulment of illegal assessments, reimbursement of taxes paid, and compensatory interest through this alternative dispute resolution mechanism.