Summary
Full Decision
ARBITRAL DECISION
The Arbitrators José Poças Falcão (Presiding Arbitrator), Suzana Fernandes da Costa and A. Sérgio de Matos, appointed by the Deontological Council of the Center for Administrative Arbitration to form an Arbitral Tribunal, hereby agree as follows:
1. Report
On 30-11-2018, the CLOSED REAL ESTATE INVESTMENT FUND A..., legal entity no...., represented by its respective managing entity B... – SGFII, S.A., legal entity no...., with registered office at Rua..., no...., ..., ...-... Lisbon, registered at the Commercial Registry Office of Lisbon under no...., filed a request for the constitution of an arbitral tribunal, with a view to declaring the illegality of the Municipal Tax on Onerous Property Transfers (IMT) assessment notice no.... of 19-12-2017, in the amount of 297,492.00 €.
The request for constitution of the Arbitral Tribunal was accepted by His Excellency the President of CAAD on 03-12-2018 and notified to the Respondent on the same date.
The Claimant did not proceed with the appointment of an arbitrator, wherefore, pursuant to article 6º, no. 2, subparagraph a) of the RJAT, the Presiding Judge of the Deontological Council of CAAD appointed as arbitrators, on 23-01-2019, José Poças Falcão (Presiding Arbitrator), Suzana Fernandes da Costa and A. Sérgio de Matos, with the appointment being accepted within the prescribed timeframe and legal terms.
On the same date the parties were duly notified of this appointment and did not manifest any intention to refuse the appointment of arbitrators, pursuant to article 11º, no. 1, subparagraphs a) and b) of the RJAT, combined with articles 6º and 7º of the Deontological Code.
Thus, in accordance with the provision in subparagraph c), no. 1, of article 11º of the RJAT, the Arbitral Tribunal was constituted on 12-02-2019.
On 28-02-2019, an order was issued directing notification of the Respondent to present a response within 30 days and, if it so wished, to request the production of additional evidence and to remit to the arbitral tribunal a copy of the administrative file within the deadline for presenting the response.
On 15-03-2019, the Respondent informed the case record that it was presenting no response.
On 18-03-2019, an order was issued dispensing with the hearing provided for in article 18º of the RJAT and granting a 20-day period for the parties to submit arguments. In the same order, the parties were invited to send the documents produced in word format, and 11-06-2019 was set as the date for the pronouncement and notification of the arbitral decision. The Claimant was further warned to comply with the provision of article 4º, no. 3 of the Regulations for Costs in Tax Arbitration Proceedings.
The Claimant submitted its arguments to the case record on 21-03-2019, and the Respondent elected not to submit any arguments.
The Claimant submitted, on 22-03-2019, to the present arbitration proceedings, proof of payment of the subsequent arbitration fee.
The parties possess legal personality and capacity and are legitimate (articles 4º and 10º, nos. 1 and 2 of the RJAT and article 1º of Ordinance no. 112-A/2011 of 22 March).
The arbitral claim is timely, pursuant to article 10º, no. 1, subparagraph a) of Decree-Law no. 10/2011 of 20 January and article 102º, no. 1, subparagraph a) of the Code of Tax Procedure and Process.
The proceedings do not suffer from nullities and no preliminary questions were raised.
2. Position of the parties
The Claimant begins by alleging that it is a closed real estate investment fund of private subscription, whose constitution was authorized by Ordinance no. 229/95, and that in the course of its activity, it acquired by public deed the full ownership of the urban property registered in the urban property register under the article..., described at the Property Registry Office of ... under no. ... .
The Claimant states that, on the date of acquisition, IMT assessment no. ... in the amount of 297,492 € was made, and that amount was paid.
Not agreeing with the assessment, the Claimant states that it filed a gracious claim, based on illegality grounds by virtue of the violation of article 1º of Decree-Law no. 1/87 of 3 January. Said gracious claim was expressly rejected.
The Tax Authority submitted no response.
3. Factual matter
3.1. Proven facts:
Having analyzed the documentary evidence produced and the position of the Claimant contained in the arbitral request, the following facts are considered proven and relevant to the decision of the case:
1. The Closed Real Estate Investment Fund A... (FIIF...) is a closed real estate investment fund of private subscription, whose constitution was authorized by Ordinance no. 229/95.
2. The FIIF... is managed and represented by the Claimant.
3. The Fund acquired, by public deed of sale and lease executed on 19-12-2017, the full ownership of the urban property located in ..., ..., ..., parish of ..., municipality of ..., registered in the urban property register under article ..., and described at the Property Registry Office of ... under no. ... .
4. On the same date, IMT assessment no...., in the amount of 297,492 €, was made, referring to the acquisition of the property identified above.
5. On the same day, 19-12-2017, the Fund proceeded to pay the IMT in the amount of 297,492 €.
6. On 13-04-2018, the Claimant filed a gracious claim regarding the assessment and IMT no. ..., in the amount of 297,492 €.
7. The Claimant was notified, on 17-09-2018, of the order rejecting the aforementioned gracious claim.
8. The Claimant filed the present request for arbitral pronouncement on 30-11-2018.
No other facts with relevance to the decision of the case were proven.
3.2. Unproven facts
No facts occurred that were not proven.
3.3. Basis for the proven factual matter:
The conviction of the arbitrators was based on the documents attached to the case record.
4. Legal matter:
4.1. Object and scope of the present proceedings
The essential legal question raised in this proceeding is whether the Fund, represented by the Claimant, in the acquisition it made, enjoys the IMT exemption enshrined in article 1º of Decree-Law no. 1/87 of 3 January.
4.2. On the law
The Claimant argues that the real estate transaction it carried out enjoys the IMT exemption enshrined in article 1º of Decree-Law no. 1/87 of 3 January, which establishes that "are exempt from Sisa the acquisitions of real property made for a real estate investment fund by the respective managing company".
In its view, in accordance with the literal wording of articles 28º and 31º, no. 6 of Decree-Law no. 287/2003 of 12-11, the acquisitions of real property carried out by a managing company of a real estate investment fund with the aim of making them part of that fund continue to be exempt from IMT. And, therefore, the contested assessment is illegal.
It invokes, in support of its understanding, jurisprudence from this Center for Administrative Arbitration (CAAD).
Finally, noting that there was erroneous interpretation of the law on the part of the TA, the Claimant seeks that it be paid compensatory interest accruing on the amount illegally assessed, which it paid on 19-12-2017.
The TA, not having exercised the right to respond, did not explain its position.
We are informed, by what was established in the factual matter, of the nature of the taxpayer, the verification of the tax facts, and that of the disputed tax act.
The question that arises for us is, therefore, that of the (non)existence of a norm preventing taxation: the Claimant argues that there is no basis for taxation because it benefits from a norm that grants it an exemption; the TA, having proceeded with the identified assessment, would understand that the exemption norm is not in force.
On this point we will follow closely the prior jurisprudence of CAAD, namely in cases no. 620/2018-T, 563/2018-T, 554/2018-T, 553/2018-T, 552/2018-T, 490/2018-T, 478/2018-T, 474/2018-T, 442/2018-T, 330/2018-T, 326/2018-T, 316/2018-T, 308/2018-T.
The norm at issue here is that of article 1º of Decree-Law no. 1/87 of 3 January.
Article 7º of the Civil Code establishes that:
"1. When not intended to have temporary force, the law ceases to be in force only if it is repealed by another law.
2. Repeal may result from express declaration, from incompatibility between the new provisions and preceding rules, or from the fact that the new law regulates the entire subject matter of the prior law".
Already in light of the regime preceding the current Civil Code (the 1867 Code, in its singular systematics, did not address the matter), Professors Pires de Lima and Antunes Varela taught, in Fundamental Notions of Civil Law (5th edition, Coimbra, 1961, p. 109 et seq.), that "The law may cease to be in force either because it has been repealed or because it has expired. (…) One speaks of expiry of the law when it ceases to be in force by force of any circumstance inherent to the law itself, independently, therefore, of a new manifestation of the legislator's will".
The expiry of the law results, more frequently, from the law itself establishing its period of validity (when that period expires), or from aiming to achieve a certain end (when that end is achieved), or from being a transitional law (when the state of affairs serving as its presupposition ends).
As for repeal, the aforementioned Authors say that "(…) it results from a new manifestation of the legislator's will, contrary to that which served as the basis for the law's validity".
Repeal may be express – the new law identifies the provisions it wishes to repeal – or tacit – the old law is incompatible with the new, with the most recent legislative choice prevailing.
The same Authors finally clarify that "Incompatibility between the two laws may result from a direct and substantive conflict existing between their respective provisions or from the fact that the new law establishes a new, complete regime of the relationships in question".
Much earlier, in 1922, Professor José Tavares – The Fundamental Principles of Civil Law, Coimbra, 1922, volume I, p. 167 – wrote that "The incompatibility of two or more legal provisions occurs when they are so antinomical, opposed, or contrary, that it becomes impossible to execute them simultaneously. Under these conditions, the last one must necessarily prevail, because it is that which represents the will of the legislator".
However remote these teachings, they remain valid today, continuing to be adopted by modern doctrine and jurisprudence.
In the present case, there are no signs that Decree-Law no. 1/87 has expired. It is thus necessary to determine whether it was repealed.
Accordingly, what must be decided is whether tacit repeal occurred.
In article 1º of Decree-Law no. 1/87 of 3 January, it was established that "are exempt from Sisa the acquisitions of real property made for a real estate investment fund by the respective managing company".
At that time the Code of Sisa and the Tax on Succession and Gifts (CSISSD), approved by Decree-Law no. 41969 of 24 November 1958, was in force. In the wording given by Decree-Law no. 223/82 of 7 June, sisa applied to "the transfers, for onerous title, of the right of ownership or of fractional figures of that right, on real property".
By means of the legislative authorization given by Law no. 26/2003 of 30 July, Decree-Law no. 287/2003 of 12 November was published, which approved the IMT Code.
The prior legal texts that referred to sisa came to be considered as referring to IMT, in accordance with article 28º, no. 2 of Decree-Law no. 287/2003; and article 31º, repealing the CSISSD, maintained in force "(…) the fiscal benefits (…) respecting the municipal sisa tax established in legislation external to the Code approved by Decree-Law no. 41969 of 24 November 1958, and in the Tax Incentives Statute, which come to be reported to the IMT".
Up to this moment it appears certain that real estate investment funds enjoyed IMT exemption in property acquisitions.
In 2006, Law 53-A/2006 of 29 December altered article 46º, no. 1 of the TIS, which came to provide that were exempt from IMT "the onerous transfers of real property integrated in real estate investment funds (…)".
The properties integrated in a fund are nothing other than those which that fund has already acquired – which leads to the conclusion that, this time, the exemption referred to alienation and not to acquisition.
Article 81º, no. 3, subparagraph e) of Draft Law no. 478/2006 of 13 October – Draft Law on the Budget for 2007 – expressly repealed Decree-Law no. 1/87 of 3 January, but such repeal was not enshrined in the 2007 Budget Law – Law no. 53-A/2006 of 29 December.
It is true that the non-adoption by the 2007 Budget Law of that proposal does not constitute a definitive argument, as it may have two meanings. One is that the legislator did not wish to repeal Decree-Law no. 1/87 of 3 January, intending to keep it in force. Another is that the legislator understood that it would not expressly repeal said Decree-Law no. 1/87 because it considered it was not then in force, which would make the repeal redundant (and even erroneous, as a legislative technique).
But this second hypothesis is not plausible and does not favor the TA's thesis: it was in the 2007 Budget Law that the legislator altered article 46º, no. 1 of the TIS, establishing the (new) IMT exemption for real estate investment funds "constituted and operating in accordance with national legislation".
That is: if the legislator, in establishing the new fiscal benefit, wished to extinguish the prior one, by substitution, it was the appropriate moment to state that Decree-Law no. 1/87 was repealed.
Because the two benefits are distinct from each other, it is inconceivable that the 2006 Law benefit would replace, without more, the 1987 Decree-Law benefit.
The legislator of 1987 exempted (in a modernized reading) from IMT "(…) the acquisitions of real property made for a real estate investment fund by the respective managing company".
That of 2006 exempted from IMT "the onerous transfers of real property integrated in real estate investment funds (…)".
Whereas in 1987 one spoke of acquisitions, clearly not covering alienations, in 2006 one speaks of transfers (which may be either acquisitions or alienations), with it being through the addition of the word "integrated in" that one concludes that the reference is limited to alienations. That which is already "integrated in" cannot be further acquired, but only alienated, by the "integrator"; reflexively, that which is not yet "integrated in" cannot be alienated by those who do not integrate it, can only be acquired in order to become "integrated in".
It thus appears clear, both that the legislator of 1987 benefited acquisitions by real estate investment funds, and that the legislator of 2006 favored alienations by those same funds.
Each benefit, distinct as they are, do not mutually exclude one another, do not contradict each other, are not antinomical, may both be applied without any incoherence.
And one cannot claim that the legislator of 2006, in establishing a benefit relating to alienations, established a complete regime of fiscal benefits in favor of real estate investment funds and repealed, by that integral treatment of the matter, the benefit in force since 1987.
In sum, the legislator of Law no. 53-A/2006, upon rejecting the Government's proposal to expressly repeal Decree-Law no. 1/87, knew that
– that Decree-Law was in force;
– the benefit which, by article 82º, it introduced in article 46º of the TIS, was cumulative with that of article 1º of Decree-Law no. 1/87;
– Law no. 53-A/2006 did not contain a complete regime of fiscal benefits granted to real estate investment funds;
Therefore, it can only be concluded, from that rejection of the Government's proposal, that it intended to maintain the benefit granted by Decree-Law no. 1/87.
On the other hand, nothing exists in the legislative evolution that occurred following the approval of the TIS by Decree-Law 215/89 of 1 July and in the successive Budget Laws that may be characterized as a systematization of the regime of fiscal benefits with respect to taxes on the assets of real estate investment funds, in such a manner that one could claim that at some point the legislator created a new, complete regime, incompatible with the continuance of Decree-Law no. 1/87. Nor is there any concrete norm that appears irreconcilable with this enactment. As was seen, article 46º (later 49º) of the TIS, in the wording given to it by the 2003 Budget Law, is harmonizable with article 1º of Decree-Law no. 1/87.
What has been said is sufficient to support the decision to be rendered below.
All these CAAD decisions, some of which we have indicated above, were in the direction advocated by the Claimant.
There is thus formed, in the arbitral tribunals, a strong, convergent and undivided jurisprudential current, flowing in the direction of the maintenance in the legal order of article 1º of Decree-Law no. 1/87 of 3 January following Law no. 53-A/2006 of 29 December.
Which is not without significance and should be noted, in reinforcement of the arguments adduced, in light of the command of article 8º of the Civil Code, which determines that "(…) the judge shall take into consideration all cases that merit analogous treatment, in order to obtain a uniform interpretation and application of the law".
In the meantime, Law no. 71/2018 of 31 December came into force, which approved the State Budget for 2019. It provides, in its article 319º:
"Are repealed (…) articles 1º and 8º of Decree-Law no. 1/87 of 3 January, which creates fiscal incentives for the constitution of real estate investment funds".
Now, this provision leaves no doubt as to the correctness of what has been set forth herein.
The aforementioned article 1º of Decree-Law no. 1/87 remained in force until its repeal by Law no. 71/2018, that is, it had not previously been expressly or tacitly repealed.
Consequently, it was in full force when the acquisition of the property in question occurred that led to the assessment contested and upheld by the TA, in not giving consideration to the gracious claim presented by the Claimant. Assessment and express rejection act which, for that reason, are illegal.
To admit otherwise would be to impute to the legislator of 2018 a glaring error, expressly repealing a norm that by then no longer existed in the legal order.
5. Compensatory interest
The Claimant requests that the Respondent be condemned to reimburse the tax improperly paid, plus compensatory interest, in accordance with article 43º, no. 1 of the LGT.
Article 43º, no. 1 of the LGT provides that "compensatory interest is owed when it is determined, in gracious claim or judicial impugnation, that there was an error attributable to the services as a result of which the tax debt was paid in an amount greater than legally owed", with article 61º, no. 4 of the CPPT providing that "if the decision recognizing the right to compensatory interest is judicial, the payment period is counted from the beginning of the period for its spontaneous execution".
In the present proceedings, it is verified that the illegality of the contested assessment is attributable to the TA.
Thus, the Claimant is entitled, in accordance with the provision of articles 24º, no. 1, subparagraph b), of the RJAT and 100º of the LGT, to the reimbursement of the amount of tax improperly paid and to compensatory interest, in accordance with the provisions of articles 43º, no. 1, of the LGT and 61º of the CPPT, calculated from the date of payment of the tax, at the rate resulting from no. 4 of article 43º of the LGT, until the date of processing of the respective credit note, in which they will be included.
6. Decision
In view of the foregoing, it is determined:
a) To judge well-founded the claim filed by the Claimant in the present arbitration proceedings, regarding the illegality of the IMT assessment no...., in the amount of 297,492 €.
b) To judge well-founded the claim for the condemnation of the Tax and Customs Authority to reimburse the Claimant the amount of the tax paid, the payment of compensatory interest in accordance with the legal terms, from the date such payment was made until the date of full reimbursement thereof;
c) To condemn the Respondent to payment of the costs of the present proceedings.
7. Value of the case:
In accordance with the provision of article 306º, no. 2, of the CPC and 97º-A, no. 1, subparagraph a) of the CPPT and 3º, no. 2 of the Regulations for Costs in Tax Arbitration Proceedings, the value of the action is fixed at 308,772.24 €.
9. Costs:
In accordance with article 22º, no. 4, of the RJAT, and Table I attached to the Regulations for Costs in Tax Arbitration Proceedings, the amount of costs is fixed at 5,508.00 €, to be borne by the Respondent, in accordance with article 22º, no. 4 of the RJAT.
Notify.
Lisbon, 14 June 2019.
[Text produced by computer, in accordance with article 138º, no. 5 of the Code of Civil Procedure (CPC), applicable by referral of article 29º, no. 1, subparagraph e) of the Tax Arbitration Regime, reviewed by me].
The Presiding Arbitrator
(José Poças Falcão)
The Arbitrator Member
(Suzana Fernandes da Costa)
The Arbitrator Member
(A. Sérgio de Matos)
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