Summary
Full Decision
ARBITRAL DECISION
They agree in Arbitral Tribunal
I – Report
1. A..., S.A., with tax identification number..., with registered address at Rua..., no..., ... Dto, in Lisbon, manager of the Closed Real Estate Investment Fund B..., filed a request for constitution of an arbitral tribunal, pursuant to the provisions of articles 2.º, no. 1, paragraph a), and 10.º et seq. of Decree-Law no. 10/2011, of 20 January, to assess the legality of the tax act of assessment of Municipal Tax on Onerous Real Estate Transfers (IMT) no.... of 14.02.2017, in the amount of € 326,231.10, relating to the acquisition of a real estate property, requesting the annulment of that act and the consequent reimbursement of the tax paid unduly and the condemnation to pay compensatory interest.
The request is grounded in the following terms:
The FIIF B... is a closed real estate investment fund with private subscription whose investment policy is specially directed towards the acquisition of real estate property affected by tourist activity for purposes of lease.
Within the scope of its activity, FIIF B... acquired, by deed of purchase and sale, unilateral promise of sale and lease, executed on 15 December 2017, full ownership of the urban real estate property located at ..., no..., ..., parish of ... and ..., municipality of Oeiras, described in the Land Register Office of Oeiras under no.... and registered in the respective urban land registry under article....
The management company of FIIF B... acquired the said real estate property with the intention that it would be integrated into the real estate investment fund.
This acquisition is exempt from IMT under article 1.º of Decree-Law no. 1/87 of 3 January, with no payment of this tax being due for the acquisition of full ownership of the said real estate property.
The Tax Authority did not present a reply
2. No production of witness testimony was requested and, in the course of the proceedings, the meeting referred to in article 18.º of the RJAT was waived, the proceedings continuing to the pleadings stage.
In pleadings, the Claimant repeated the arguments set forth in the initial petition, reiterating its previous position. The Tax Authority did not present counter-arguments.
3. The request for constitution of the arbitral tribunal was accepted by the President of the CAAD and automatically notified to the Tax and Customs Authority in accordance with the applicable regulations.
Under the provisions of paragraph a) of no. 2 of article 6.º and paragraph b) of no. 1 of article 11.º of the RJAT, in the wording introduced by article 228.º of Law no. 66-B/2012, of 31 December, the Deontological Council designated as arbitrators of the collective arbitral tribunal the undersigned, who communicated acceptance of the assignment within the applicable period.
The parties were duly and timely notified of this designation and did not manifest any intention to refuse it, in accordance with the combined provisions of article 11.º, no. 1, paragraphs a) and b), of the RJAT and articles 6.º and 7.º of the Deontological Code.
Thus, in accordance with the provisions of paragraph c) of no. 1 of article 11.º of the RJAT, in the wording introduced by article 228.º of Law no. 66-B/2012, of 31 December, the collective arbitral tribunal was constituted on 13 February 2019.
The arbitral tribunal was regularly constituted and is materially competent, in view of the provisions of articles 2.º, no. 1, paragraph a), and 30.º, no. 1, of Decree-Law no. 10/2011, of 20 January.
The parties have legal personality and capacity, are legitimate and are represented (articles 4.º and 10.º, no. 2, of the same statute and 1.º of Ordinance no. 112-A/2011, of 22 March).
The proceedings do not suffer from nullities and no exceptions were invoked.
It falls to us to assess and decide.
II – Legal Reasoning
Factual Matters
4. The factual matters relevant to the decision of the case are as follows:
a) The Closed Real Estate Investment Fund B..., managed by the Claimant, is a real estate investment fund whose activity is regulated by the General Regime of Collective Investment Undertakings, approved by Law no. 16/2015, of 24 February.
b) In the exercise of its activity, the Claimant acquired, by deed of 15 December 2017, in representation of FIIF B..., and in order to integrate it into the assets of the latter, the urban real estate property located at ..., no..., ..., parish of ... and ..., municipality of Oeiras, described in the Land Register Office of Oeiras under no.... and registered in the respective urban land registry under article ... (Doc. 2 attached with the arbitral request).
c) On 14 December 2017, the IMT assessment no.... relating to the acquisition of the real estate property was processed and paid, in the amount of € 326,231.10 (Doc. 3 attached with the arbitral request).
d) On 12 April 2018, a voluntary recourse was filed with the Oeiras Finance Service... presented by FIIF B... in which it petitioned for the annulment of the identified IMT assessment act, for illegality thereof as a result of violation of article 1.º of Decree-Law no. 1/87, of 3 January and the consequent reimbursement of the amount paid, plus compensatory interest at the legal rate (Doc. 4 attached with the arbitral request).
e) On 13 August 2018, FIIF B... was notified of the draft decision rejecting the voluntary recourse presented (Doc. 5 attached with the arbitral request).
f) FIIF B... did not exercise the right to prior hearing.
g) On 8 November 2018, FIIF B... was notified of the decision rejecting the aforementioned voluntary recourse (Doc. 6 attached with the arbitral request).
Legal Question
5. The Claimant contends that the acquisition of the real estate property carried out for the Real Estate Investment Fund, which is under its management, is covered by the exemption from IMT, originally provided for in article 1.º of Decree-Law no. 1/87, of 3 January, as an exemption from transfer tax (sisa), and which was reserved by article 28.º, no. 2, of Decree-Law no. 287/2003, of 12 November, and maintained in force by article 31.º, no. 6, of that statute.
The question that arises is therefore whether the subsequent legislative evolution caused the expiry of the aforementioned provision of article 1.º of Decree-Law no. 1/87.
On this matter, the arbitral decision rendered in Case no. 622/2017-T has already pronounced itself – in line with what was also decided in Cases nos. 326/2018-T and 544/2016-T – and which, for lack of need for any other considerations, is now reproduced:
"Decree-Law no. 1/87 provides in its article 1.º that 'acquisitions of real estate property made for a real estate investment fund by its respective management company are exempt from transfer tax (sisa)'. The provision arises as a consequence of the regulation of real estate investment funds, carried out by Decree-Law no. 246/85, of 12 July, and, as appears from its preamble, was intended to define an adequate tax framework for the creation of these funds to which the Government recognizes an important contribution to the formation of savings and mobilization of investments in the real estate sector, with positive effects on construction and the real estate rental market.
Meanwhile, Decree-Law no. 287/2003, of 12 November, which carried out the reform of property taxation, approving in annex the Code of Municipal Tax on Real Estate (CIMI), and the Code of Municipal Tax on Onerous Real Estate Transfers (CIMT), determined, in its article 28.º, no. 2, that references contained in legal texts to the municipal transfer tax (sisa) shall be considered as referring to the Code of Municipal Tax on Onerous Real Estate Transfers.
Furthermore, the same statute, in article 31.º – which included various repeal provisions – reserved, in its no. 6, the maintenance in force of tax benefits relating to the municipal transfer tax (sisa) established in separate legislation.
Thus, in accordance with the combined interpretation of the cited provisions of articles 28.º and 31.º, no. 6, of Decree-Law no. 287/2003, exemptions from transfer tax (sisa) contained in any separate statutes should be considered as referring to IMT, and, on the other hand, acquisitions of real estate property made for a real estate investment fund would continue to be exempt from IMT by effect of the provision established in article 1.º of Decree-Law no. 1/87.
Following the creation of the exemption from transfer tax (sisa) relating to the acquisition of real estate property for real estate investment funds, in 1987, Decree-Law no. 215/89, of 1 July, came to approve the Tax Benefits Statute, with the clear purpose of systematizing the general principles to which the award of benefit situations must be subject. The TBS arose as a consequence of the reform of income tax on individuals (CIRS), income tax on legal entities (CIRC) and the municipal contribution (CA), which had already introduced some structural mechanisms for tax relief, so the Statute was intended to characterize some other situations of a less structural character but which were of relative stability, leaving for future State budget laws the benefits with markedly cyclical purposes or which required more frequent regulation (cfr. in this sense, its preamble note).
In the original wording of the TBS, and in relation to real estate investment and management companies, only a specific tax regime for taxation under corporate income tax (IRC) was contemplated, and in the context of personal income tax (IRS), regarding profits distributed by those companies to their respective partners (article 26.º). This regime was maintained with various amendments and came to be transposed to article 22.º with Law no. 109-B/2001, of 27 December, under the heading "Investment Funds", which was also subject to various legislative modifications.
It is the new wording given to article 46.º of the TBS by the State Budget Law for 2003 (Law no. 32-B/2002, of 30 December) that provides, for the first time, a tax exemption scheme in favor of real estate investment funds in matters of municipal contribution (CA), in the following terms:
Real estate property integrated into real estate investment funds and equivalent entities, pension funds and retirement savings funds, which are constituted and operated in accordance with national legislation, are exempt from municipal contribution.
Following the reform of property taxation, approved by the aforementioned Decree-Law no. 287/2003 – which repealed the Code of Municipal Contribution (CA) – that article 46.º, in the wording given by the State Budget Law for 2007 (Law 53-A/2006, of 29 December) came to establish the exemption from municipal real estate tax (IMI) and municipal tax on onerous real estate transfers (IMT) for real estate property integrated into real estate investment funds, under the same conditions already provided for in the previous wording of the provision, and Decree-Law no. 108/2008, of 26 June, maintained this same exemption in the same terms.
Law no. 3-B/2010, of 28 April, being also a budget law, through new wording given to article 49.º of the TBS, came to exempt from municipal real estate tax (IMI) and municipal tax on onerous real estate transfers (IMT) only "real estate property integrated into open real estate investment funds", and the State Budget Law for 2012 (Law no. 55-A/2010, of 31 December) extended this exemption to "real estate property integrated into open or closed real estate investment funds with public subscription".
Law no. 83-C/2013, of 31 December, amending that article 49.º, suppressed the exemption, coming to provide for the reduction to half of the rates of municipal real estate tax (IMI) and municipal tax on onerous real estate transfers (IMT) applicable to real estate property integrated into open or closed real estate investment funds with public subscription.
Article 49.º of the TBS was repealed by article 215.º, no. 1, paragraph g), of Law no. 7-A/2016, of 30 March.
[6.] From the legislative evolution just described emerges the idea that the tax benefits granted to real estate investment funds do not have a systematic character, instead assuming a markedly cyclical nature, thus justifying that successive amendments to the legal regime have been established, as a rule, by means of budget laws.
Suffice it to note that it began by providing for the exemption from municipal contribution – and from IMI and IMT – in relation to real estate property integrated into any type of real estate investment fund, to later restrict that exemption to real estate property integrated into open real estate investment funds. Later, the exemption was restored with respect to real estate property integrated into open or closed real estate investment funds with public subscription until the tax benefit was transformed into a reduction in the rate of applicable tax and, finally, was suppressed.
It is therefore not possible to see, in the approval of the TBS and in the multiple amendments to that Statute, a general criterion that permits the definition of a stable tax regime that could override other separate provisions that already existed in the legal order.
Furthermore, it is important to note that the scope of application of the exemption initially created by Law no. 53-A/2006, through the amendment of article 46.º of the TBS – which came to provide for the exemption from IMI and IMT in relation to real estate property integrated into real estate investment funds – is not coincident with that of the exemption contemplated in article 1.º of Decree-Law no. 1/87, which refers to acquisitions of real estate property made for a real estate investment fund by its respective management company. In fact, by effect of the new provision of article 46.º of the TBS, real estate property already integrated into real estate investment funds came to be exempt from IMT, whereas the exemption referred to in the 1987 statute covered acquisitions of real estate property made by management companies of real estate investment funds to be integrated into the assets of these funds. This means that the TBS came to broaden the exemption, covering not only situations in which the fund was in the position of purchaser of the real estate property, but also those in which the fund acts in the position of seller of the real estate property (cfr. in this sense, the arbitral award rendered in Case no. 544/2016, in which the same question was analyzed).
[7.] It now falls to address the question of whether the norm of article 1.º of Decree-Law no. 1/87 is repealed by any of the provisions of the TBS that came to regulate the exemption from IMT in relation to real estate investment funds or whether there was a systemic repeal by effect of the new overall regulation of the matter of tax benefits.
As follows from article 7.º, no. 2, of the Civil Code, the repeal of a law 'may result from express declaration, incompatibility between the new provisions and the previous rules or from the circumstance that the new law regulates the entire subject matter of the previous law'.
Repeal is express when a law individualizes, in an explicit declaration, the object of cessation of force of a previous law. Tacit repeal takes place when, in the face of silence of the legislator on the identification of the repealed norms, a contradiction of content is registered between the provisions of a new law and those of a chronologically preceding legislative act. Global repeal occurs when a complex of norms becomes, in its entirety, subject to a discipline different from that previously in force, regardless of the problem of its compatibility with the rules previously in force (cfr. BAPTISTA MACHADO, Introdução ao Direito e ao Discurso Legitimador, Coimbra, 1993, pages 165-166; CARLOS BLANCO MORAIS, Leis Reforçadas – As Leis Reforçadas do Procedimento no Âmbito dos Critérios Estruturantes da Relações entre Actos legislativos, Coimbra, 1998, pages 338, 341 and 343).
Express repeal raises no special difficulties. It consists of a declaration made in the new law and may be limited to extinguishing the force of the old law or to restoring a previous legal regime that had been repealed by it, or be accompanied by constitutive or modifying effects, as occurs when the repealing law institutes a new complex of norms or operates modification of the previous legal regime.
Tacit repeal occurs to the extent of the contradiction existing between the previous law and the new law, for where that contradiction does not exist, coexistence or intermingling between the two laws is possible.
Global repeal has in common with tacit repeal the fact that it operates in the possible silence of the legislator, who may say nothing about the suppression of the antecedent laws, but differs from it in the fact that it does not necessarily register a general incompatibility of commands between the old law and the new law. The rationale for this form of repeal is grounded essentially in reasons associated with the updating of the process of legal innovation or policies of systematization and legislative consolidation (CARLOS BLANCO MORALIS, op. cit., page 344).
[8.] Applying the principles just set forth to the situation sub judice, it is easily concluded that the norm of article 1.º of Decree-Law no. 1/87 cannot be regarded as repealed.
It is established that the norm of article 1.º of Decree-Law no. 1/87 was not the object of express repeal. And, as has been suggested, there is no incompatibility between that norm and the one that came to be introduced in the TBS (article 46.º later renumbered as article 49.º), since those provisions contain different scopes of application and the latter merely broadened the exemption already established by the 1987 statute.
The possibility of a systemic repeal having occurred is also ruled out. As has been shown, the TBS, in its original version, and in relation to real estate management and investment companies, only established a specific tax regime in matters of IRC and IRS. And only much later, through budget laws, was a regime established for real estate investment funds, through the new wording given to article 46.º (later renumbered as article 49.º), the exemption in matters of property taxation by reference to municipal contribution and, subsequently, to IMI and IMT (Laws no. 32-B/2002, of 30 December, and 53-A/2006, of 29 December). This regime underwent further successive amendments until the tax benefit came to be translated into a reduction to half of the rates of real estate tax and tax on onerous real estate transfers (Law no. 83-C/2013, of 31 December) and was finally extinguished by means of the repeal of article 49.º operated by Law no. 7-A/2016, of 30 March.
With the approval of the Tax Benefits Statute, tax benefits of a structural character applicable to the financial system and capital market, including herein investment funds, focused on income taxation. The subsequent introduction of an exemption from IMI and IMT applicable to investment funds, in the category of tax benefits relating to real estate property, through mere amendment of an already existing provision, does not evidence any general criterion defining the regime of tax benefits in matters of property taxation, and the subsequent legislative evolution reveals that the exemption was instituted for merely cyclical reasons and without a clear purpose of systematizing the legal regime.
In this conditional context, one cannot speak of a global repeal of article 1.º of Decree-Law no. 1/87."
All of these findings retain full validity and are applicable to the situation of the present case, leading to the conclusion that the IMT tax act relating to the acquisition of the real estate property by the Claimant as representative of the Real Estate Investment Fund is illegal by violation of the provision cited in article 1.º of Decree-Law no. 1/87, of 3 January.
Compensatory Interest
The Claimant further requests the condemnation of the Tax Authority to pay compensatory interest, at the legal rate, calculated on the tax, until full reimbursement of the amount owed.
In accordance with the provisions of paragraph b) of article 24.º of the RJAT, the arbitral decision on the merit of the claim for which no appeal or challenge is available binds the Tax Administration, in the exact terms of the success of the arbitral decision in favor of the taxpayer, requiring it to "restore the situation that would have existed if the tax act which is the subject of the arbitral decision had not been performed, adopting the acts and operations necessary for that purpose". This is in line with the provision of article 100.º of the LGT, applicable by virtue of the provision of paragraph a) of no. 1 of article 29.º of the RJAT.
Also in accordance with no. 5 of article 24.º of the RJAT "payment of interest is due, regardless of its nature, in accordance with the terms provided for in the General Tax Law and in the Tax Procedure and Process Code", which refers to the provision of articles 43.º, no. 1, of the LGT and 61.º, no. 5, of the CPPT, implying the payment of compensatory interest from the date of unduly paid tax until the date of processing of the respective credit note.
There is therefore place, following the declaration of illegality of the IMT assessment act, to the payment of compensatory interest, in accordance with the cited provisions of articles 43.º, no. 1, of the LGT and 61.º, no. 5, of the CPPT, calculated on the amount that the Claimant paid unduly, at the rate of legal interest (articles 35.º, no. 10, and 43.º, no. 4, of the LGT).
III – Decision
Terms in which it is decided:
a) To uphold the request for arbitral pronouncement and annul the municipal tax act on onerous real estate transfers no....;
b) To condemn to the reimbursement of the amount of € 326,231.10 and to the payment of compensatory interest from the payment of the tax until the date of issuance of the credit note, in accordance with the provisions of articles 43.º of the LGT and 61.º of the CPPT.
Value of the Case
The Claimant indicated as the value of the case the amount of € 326,231.10, which was not contested by the Respondent, and corresponds to the value of the assessment that it was sought to oppose (article 97.º, no. 1, paragraph a), of the CPPT).
Costs
In accordance with the provisions of articles 12.º, no. 2, and 24.º, no. 4, of the RJAT, and 3.º, no. 2, of the Regulation of Costs in Tax Arbitration Proceedings and Table I annexed to that Regulation, the amount of costs is fixed at € 5,814.00, which shall be borne by the Respondent.
Notify.
Lisbon, 30 April 2019
The President of the Arbitral Tribunal,
Carlos Fernandes Cadilha
The Arbitrator Member,
Cristina Aragão Seia
The Arbitrator Member,
Rui Ferreira Rodrigues
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