IMT and Stamp Tax Exemption for Real Estate Investment Funds (FIIAH): Unconstitutionality of Retroactive Fiscal Law

ARBITRAL DECISION

I – Report

1.1. A…, S.A., with registered office …, no. … –…, …-… Lisbon, and with Tax Identification Number … (hereinafter referred to as the "Claimant") – in its capacity as manager of the real estate investment fund "B… – Closed Real Estate Investment Fund for Residential Rental" ("Fund B…") – in light of the Property Transfer Tax assessment n.º … and the Stamp Duty assessment n.º…, filed, on 3/2/2016, an application for constitution of an arbitral tribunal and for arbitral pronouncement, in accordance with the provisions of article 2.º, n.º 1, al. a), of Decree-Law n.º 10/2011, of 20/1 (Legal Regime of Tax Arbitration, hereinafter referred to only as "LRTA"), in which the Tax and Customs Authority (TA) is named as respondent, seeking that the "[nullity be declared of, or, if this is not accepted, the voidability of] the [aforementioned] assessments, based on the [...] unconstitutionality" of "article 236.º (Transitional Provision within the scope of the Special Regime Applicable to REIFHR and REICHR) provided for in Law n.º 83-C/2013, of 31 December – to the extent that it determines the application of the current Tax Regime of REIFHR 'to properties that have been acquired by REIFHR before 1 January 2014, counting, in such cases, the period of three years provided for in n.º 14 from 1 January 2014' – constitutes a new regime of expiry of the exemptions provided for in n.º 7, paragraph a) and n.º 8 of article 8.º (Tax Regime) of the Tax Regime of REIFHR, revealing a flagrant and unequivocal breach of the principle of non-retroactivity of tax law, enshrined in article 103.º (Tax System), number 3, of the Constitution of the Portuguese Republic".

1.2. On 20/4/2016 the present Single Arbitral Tribunal was constituted.

1.3. In accordance with article 17.º, n.º 1, of the LRTA, the TA was served with notice, as respondent party, to file a response, in accordance with the aforementioned article. The TA filed its response on 25/5/2016, having argued for the total lack of merit of the Claimant's application, and attached six documents containing previous arbitral decisions of the CAAD.

1.4. By order of 6/6/2016, the Tribunal considered that a meeting, as provided for in the aforementioned article 18.º, was unnecessary under the provisions of article 16.º, al. c), of the LRTA and that the case was ready for decision. Accordingly, 16/6/2016 was set as the date for the pronouncement of the arbitral decision.

1.5. The Arbitral Tribunal was duly constituted, is materially competent, the case is not affected by vices that would invalidate it and the Parties have legal personality and capacity, being duly legitimate.

II – Parties' Allegations

2.1. The present Claimant alleges, in its initial petition, that: a) "the assessments [in question] are affected by illegality for breach of the provisions of article 103.º (Tax System), number 3, of the Constitution of the Portuguese Republic and must, consequently, be declared null"; b) "the Property Transfer Tax is a tax of sole obligation [...]. This qualification is relevant here to the extent that the Property Transfer Tax and Stamp Duty exemptions, contained, respectively, in numbers 7, paragraph a), and 8 of article 8.º (Tax Regime) of the Tax Regime of REIFHR, were granted at the request of Fund B…, in accordance with article 10.º (Recognition of Exemptions) of the Property Transfer Tax Code, at a time prior to the entry of the relevant properties into the patrimony of Fund B… . In other words, at the moment when the properties – subject of the Assessments – entered into the patrimony of Fund B… the Property Transfer Tax and Stamp Duty exemptions provided for, respectively, in numbers 7, paragraph a), and 8 of article 8.º (Tax Regime) of the Tax Regime of REIFHR became permanently crystallised in the tax legal order"; c) "indeed, the taxable event is, both in the context of Property Transfer Tax and in the context of Stamp Duty, the acquisition of the property of the relevant properties by Fund B… . And the Property Transfer Tax and Stamp Duty exemptions were not, at the time when they entered into the patrimony of Fund B…, conditioned by the verification of any subsequent facts or circumstances nor, either, subject to any expiry regime"; d) "as there are [...] legally provided, at the moment of recognition of the exemption, no facts or circumstances upon which the expiry of the recognised exemption depended, it is clear that the subsequent imposition of such facts or circumstances to exemptions crystallised in the tax legal order of the Claimant is affected by unconstitutionality, for breach of the principle of non-retroactivity of tax law, enshrined in article 103.º (Tax System), number 3, of the Constitution of the Portuguese Republic"; e) "article 236.º (Transitional Provision within the scope of the Special Regime Applicable to REIFHR and REICHR) of Law n.º 83-C/2013, of 31 December, when extending the application of the current Tax Regime of REIFHR 'to properties that have been acquired by REIFHR before 1 January 2014, counting, in such cases, the period of three years provided for in n.º 14 from 1 January 2014' – is in direct and unequivocal breach of the principle of non-retroactivity of tax law constitutionally enshrined. Indeed, the extension provided for there constitutes a new regime of expiry of the exemptions provided for in numbers 7, paragraph a) and 8 (Tax Regime) and not a mere specification of a criterion previously provided for"; f) "in the case under consideration there are no doubts whatsoever that the taxable facts that the new law intends to regulate have already produced all their effects under the old law"; g) "it is necessary to clarify here whether the unconstitutionality now alleged by the Claimant should have as a consequence the voidability or the nullity of the Assessments [...]. [...]. Considering that the principle of fiscal non-retroactivity has the character of a fundamental right, endowed with the protective legal regime of this right, its disrespect gives rise to the nullity of the act, in this case, the nullity of the Assessments"; h) "the admissibility of Challenging the vice of nullity without dependence on a time limit does not exclude the competence of the Arbitral Tax Tribunal, in particular, by literal interpretation of article 10.º (Application for Constitution of Arbitral Tribunal) of the LRTA. Indeed, the said article 10.º (application for constitution of arbitral tribunal) of the LRTA should not be interpreted in the sense that it is exclusively applicable to situations in which acts whose challenge is subject to a time limit are at issue"; i) "without admitting and merely for purposes of caution in legal representation, admitting, subsidiarily, that the vice (illegality) of the Assessments determines their voidability (and not nullity), the Assessments should be voided accordingly, in accordance with articles 10.º, n.º 1, al. a), of the LRTA and article 102.º, n.º 1, al. a), of the Tax Procedure and Process Code."

2.2. By the foregoing, the present Claimant seeks, in summary: "(I) [that] nullity of the Assessments be declared based on their unconstitutionality; subsidiarily, if this is not accepted, the Assessments be voided"; "(II) be reimbursed [...] for the entire amount paid by virtue of the Assessments subject to the present application for arbitral pronouncement, plus, in accordance with article 43.º (Undue Payment of Tax Liability) of the General Tax Law, the compensatory interest that may be owed up to the date of such reimbursement."

2.3. For its part, the TA alleges, in its response, that: a) the "Claimant argues that the TA should not have proceeded with the assessments under consideration, as such tax acts are based on article 236.º of the Tax Regime of REIFHR, which allegedly is affected by unconstitutionality for breach of the principle of non-retroactivity of tax law, in accordance with article 103.º, n.º 3 of the CRP. However, and without prejudice to what is developed below regarding the absence of the vice of unconstitutionality alleged by the Claimant, it is necessary here, from the outset, to state that the TA's actions, contrary to what the Claimant argues, could not have been different"; b) "in accordance with n.º 2 of article 266.º of the CRP, the Administration is obliged to act in accordance with the principle of legality, such principle being implemented at the infra-constitutional level in n.º 1 of article 3.º of the Administrative Procedure Code (APC) [...]. In other words, from such legal impositions it follows that administrative bodies and officials do not have competence to decide on the non-application of norms with respect to which doubts of constitutionality are raised"; c) "from the foregoing it results that the Administration is subject to law and to law and its bodies and officials must be the first to comply with it; and it may not, therefore, be required to pronounce on the options of the legislator, as these, once embodied in law, are the normative discipline within which it exercises its functions in pursuit of the public interest"; d) "in summary, the TA could not/cannot refuse to apply a norm or fail to comply with the law by invoking or questioning its constitutionality, as it is subject to the principle of legality, as established in articles 266.º n.º 2 of the CRP, 3.º n.º 1 of the APC and 55.º of the GTL"; e) "article 102.º of Law n.º 64-A/2008, of 31 December (State Budget for 2009), approved a special regime applicable to real estate investment funds for residential rental (REIFHR) and real estate investment companies for residential rental (REICHR). The regime provided for there would be applicable to REIFHR or REICHR established during the five years following the entry into force of the said law and to real property acquired by these during the same period. With regard to the tax regime specifically provided for there, it is necessary to note, for what is relevant here, the provisions of article 8.º, n.º 7, paragraph a), relating to the exemption in respect of Property Transfer Tax and article 8.º, n.º 8, relating to the exemption in respect of Stamp Duty"; f) "in accordance with article 8.º, n.º 7, paragraph a), exemptions from Property Transfer Tax are granted for 'Acquisitions of urban properties or autonomous units of urban properties intended exclusively for rental for permanent housing by the investment funds referred to in n.º 1'. Such exemption being applicable, by force of the provisions of n.º 1, to REIFHR established between 1 January 2009 and 31 December 2013, operating in accordance with national legislation and in compliance with the conditions provided for in articles 1.º to 7.º of its respective legal regime. For its part, in accordance with article 8.º, n.º 8, 'Exemptions from stamp duty are granted for all acts performed, as long as they are related to the transmission of urban properties intended for permanent housing which occurs due to the conversion of the property right in such properties into a rental right over them, as well as with the exercise of the purchase option provided for in n.º 3 of article 5.º'"; g) "Law n.º 83-C/2013, of 31 December (State Budget for 2014), gave new wording to the aforementioned article 8.º, relating to the tax regime applicable to REIFHR, adding, in particular, numbers 14 to 16 [...]. Furthermore, Law n.º 83-C/2013, of 31 December also provided for, in its article 236.º, the following transitional provision [...]"; h) "indeed, as also noted by the Claimant, n.º 14 of article 8.º of the Tax Regime of REIFHR gave concrete meaning to the expression 'urban properties intended exclusively for rental for permanent housing', since, in accordance with the provisions therein, 'it is considered that urban properties are intended for rental for permanent housing whenever they are subject to a rental contract for permanent housing within a period of three years counted from the moment when they entered the patrimony of the fund'. Being that, alongside such specification, with the introduction of n.ºs 15 and 16.º in the aforementioned article 8.º, there came to be provided a regime for cessation of the benefit in the event that the legal requirement provided for in n.º 14 is not observed"; i) "with regard to the property identified above, which formed part of the Fund at the time the Law 83-C/2013, of 31 December entered into force, the Claimant requested from the TA the assessments of Property Transfer Tax and Stamp Duty, due to the changes introduced to the tax regime of REIFHR, to the extent that, at the end of 2015, it disposed of it to third parties, thus giving it a different destination than what was intended: residential rental"; j) "[the Claimant argues that] the assessments in question are affected by illegality for breach of the provisions of article 103.º (Tax System), n.º 3, of the CRP, and should, as a consequence, be declared null. [...] However, as will be better demonstrated, the Claimant's arguments are manifestly lacking in merit"; l) "it is necessary, from the outset, to note that the vice pointed out, for alleged breach of article 103.º of the CRP, does not give rise to nullity [...]. [...] even if the breach of the normative provision invoked by the Claimant were to occur, in particular, article 103.º, n.º 3, of the CRP, the fact is that, as stated, the acts challenged are only capable of being voided and never of their declaration of nullity"; m) "specifically with regard to non-retroactivity of tax law, it is already the understanding of the case law that the possible breach of such principle does not imply disrespect of directly applicable and binding constitutional norms, such as those referring to rights, freedoms and guarantees (cf. article 18.º, n.º 1, of the CRP)"; n) "in summary, in light of all of the foregoing, in particular bearing in mind the case law cited, it is to be concluded that, even if the vice attributed to the assessments in question exists, it is never generative of nullity, but only of voidability"; o) "the persons liable to tax who sought to benefit from the aforementioned exemptions [of Property Transfer Tax and Stamp Duty, in light of the wording of Law n.º 64-A/2008, of 31/12], have always had, from the beginning of the tax regime applicable to REIFHR, to meet the requirement that such properties be intended exclusively for rental for permanent housing. As a result, the Claimant lacks grounds when stating that the exemptions in question were not conditioned by any facts or circumstances, and, consequently, the argumentation that it constructs based on such erroneous assumption is equally flawed with error. [...] the new wording introduced by Law n.º 83-C/2013, of 31 December, in furtherance of legal certainty and of the principle of protection of legitimate expectations, and in line with the spirit of the legislator, at the time of creation of the regime, came only to specify the criterion already required"; p) "it is to be concluded, thus, that, with the changes introduced, the ratio of the exemptions enshrined was not altered, and it is to be stressed that the immediate extinction of the benefit was not determined in the event that the said rental contract is not entered into, as a fairly broad period of three years was granted for such purpose"; q) "bearing in mind the disposal of the properties in the course of 2015, it is unequivocal that the Claimant could not, in any case, benefit from the exemption sought"; r) "it is clear that, from the beginning of the regime, the tax benefits in question applicable to REIFHR have always depended on the allocation of the real property to rental for permanent housing, a legal requirement that the TA, within the scope of its inspection powers, could always assess, in order to conclude on the permanence of the benefit or, rather, on the restoration of the standard tax system"; s) "contrary to what the Claimant argues, there is no introduction ex novo of an expiry regime for the benefit, and even less is there any frustration of the expectations of persons liable to tax or breach of the principle of non-retroactivity of tax law"; t) "as error cannot be attributed to the TA's services that, by itself, has determined the payment of a tax liability in an amount greater than that legally due – since it was not within their discretion to decide differently from the manner in which they decided – it can only be concluded that no compensatory interest is owed in accordance with article 43.º of the GTL."

2.4. The TA concludes, finally, that: "(i) the present application for arbitral pronouncement should be judged to lack merit as not proven and, consequently, the Respondent absolved of all claims, in the terms petitioned above, with all due and legal consequences, or, if this is not accepted, (ii) it is requested, by appeal to the provisions of article 280.º, n.º 3, of the CRP and article 72.º, n.º 3, of the Law of the Constitutional Court, that notification of the learned arbitral decision be determined to the Public Prosecutor."

III – Established, Unestablished Facts and Respective Grounds

3.1. The following facts are considered established:

i) The present Claimant requested from the TA the assessment of Property Transfer Tax and Stamp Duty for the acts of disposal of real property by the "Fund B…", as follows: property U-… located at …, …, Block…, ..., registered in the urban cadastral matrix of the parish of … and …; Property Transfer Tax assessment n.º … and Stamp Duty assessment n.º…, in the respective amounts of €33,870.00 and €4,516.00 (which, added together, correspond to the amount in question: €38,386.00) – see Doc. 1 attached.

ii) The property in question was acquired benefiting from the Property Transfer Tax and Stamp Duty exemptions provided for, respectively, in n.º 7, al. a), and n.º 8 of article 8.º of the special regime applicable to REIFHR (which were granted at the request, in accordance with the provisions of article 10.º of the Property Transfer Tax Code).

iii) The aforementioned assessments were paid by the Claimant on 17/12/2015, as appears from the reading of Doc. 2 attached to the case file. Dissatisfied with the said assessments, the Claimant filed its application for arbitral pronouncement on 3/2/2016.

3.2. There are no unestablished facts relevant to the decision of the case.

3.3. The facts considered pertinent and established (see 3.1) are founded on the analysis of the positions exposed by the parties and the documentary evidence joined to the case file.

IV – On the Law

In the case under consideration, there are two controversial issues of law: 1) whether the Property Transfer Tax and Stamp Duty assessments are illegal, as issued under article 236.º of Law 83-C/2013, of 31/12, which the Claimant considers to be unconstitutional for breach of the provisions of article 103.º of the CRP (and, further, null for alleged breach of the essential content of a fundamental right, in accordance with article 133.º, n.º 2, al. d), of the APC); and 2) whether compensatory interest is owed to the Claimant.

Let us examine this, then.

1. The Claimant alleges that the assessments in question are illegal because they were issued under article 236.º of Law n.º 83-C/2013, of 31/12 (State Budget Law 2014) – an article which the Claimant considers unconstitutional for breach of the aforementioned article 103.º of the CRP.

In its view, "article 236.º (Transitional Provision within the scope of the Special Regime Applicable to REIFHR and REICHR) of Law n.º 83-C/2013, of 31 December, when extending the application of the current Tax Regime of REIFHR 'to properties that have been acquired by REIFHR before 1 January 2014, counting, in such cases, the period of three years provided for in n.º 14 from 1 January 2014' – is in direct and unequivocal breach of the principle of non-retroactivity of tax law constitutionally enshrined. Indeed, the extension provided for there constitutes a new regime of expiry of the exemptions provided for in numbers 7, paragraph a) and 8 (Tax Regime) and not a mere specification of a criterion previously provided for." By the foregoing, the Claimant concludes that "in the case under consideration there are no doubts whatsoever that the taxable facts that the new law intends to regulate have already produced all their effects under the old law".

This does not, however, appear to be the issue at hand.

First of all, it is appropriate to observe Law n.º 64-A/2008, of 31/12, which approved the special regime applicable to REIFHR. In that regime it was provided for, in particular: in n.º 7 of article 8.º, that exemptions from Property Transfer Tax were granted for "acquisitions of urban properties or units of autonomous urban properties intended exclusively for rental for permanent housing" by the said funds; and, in n.º 8 of the same article, that exemptions from Stamp Duty were granted for "all acts performed, as long as they are related to the transmission of urban properties intended for permanent housing which occurs due to the conversion of the property right in such properties into a rental right over them".

Law n.º 83-C/2013, of 31/12, amended the wording of the aforementioned article 8.º, adding numbers 14 to 16, which are reproduced here:

"14 - For the purposes of the provisions of n.ºs 6 to 8 of the aforementioned article 8.º, it is considered that 'urban properties are intended for rental for permanent housing whenever they are subject to a rental contract for permanent housing within a period of three years counted from the moment when they entered the patrimony of the fund, with the person liable to tax required to communicate and provide proof to the TA of the respective effective rental, within 30 days following the end of the said period.

15 - When the properties have not been subject to a rental contract within the period of three years provided for in the previous number, the exemptions provided for in n.ºs 6 to 8 cease to have effect, and in such case the person liable to tax must request from the TA, within 30 days following the end of the said period, the assessment of the respective tax.

16 - If the properties are disposed of, with the exception of the cases provided for in article 5.º, or if the REIFHR is subject to liquidation, before the period provided for in n.º 14 has elapsed, the person liable to tax must also request from the TA, before the disposal of the property or the liquidation of the REIFHR, the assessment of the tax owed in accordance with the previous number".

In article 236.º of the aforementioned Law n.º 83-C/2013, of 31/12, the following transitional provision was further established:

"1 - The provisions of n.ºs 14 to 16 of article 8.º of the special regime applicable to REIFHR and REICHR, approved by articles 102.º to 104.º of Law n.º 64-A/2008, of 31 December, shall apply to properties acquired by REIFHR from 1 January 2014 onwards.

2 - Without prejudice to the provision of the previous number, the provisions of n.ºs 14 to 16 of article 8.º of the special regime applicable to REIFHR and REICHR, approved by articles 102.º to 104.º of Law n.º 64-A/2008, of 31 December, shall also apply to properties acquired by REIFHR before 1 January 2014, counting, in such cases, the period of three years provided for in n.º 14 from 1 January 2014".

From this it follows that the said Law established a transitional period for application of the legal amendments, with a view, according to what the Respondent states (see §64 and 68 of the response), "in furtherance of legal certainty and of the principle of protection of legitimate expectations, and in line with the spirit of the legislator, at the time of creation of the regime, [...] only to specify the criterion already required [...]. Being certain that, in any event, bearing in mind the disposal of the properties in the course of 2015, it is unequivocal that the Claimant could not [...] benefit from the exemption sought."

In the same sense, Arbitral Decision dated 14/3/2016, issued in proc. 398/2015-T, notes that "the obligation to allocate the property to residential rental is not a requirement of the amendments introduced by the State Budget for 2014, but rather a requirement of the tax regime of REIFHR ab initio, indeed a natural consequence of the motivations that led to the creation of these funds. However, this was not the case at hand [...]. The Property Transfer Tax assessments made [...] were not based on its maintenance in the fund for a period equal to or greater than 3 years without allocation to rental for permanent housing having occurred. [...]."

Indeed, as also stated in Arbitral Decision dated 22/4/2016, which was issued in case n.º 691/2015-T: "The State Budget for 2014 does establish, it is true, a new requirement for the exemption: if allocation to rental for permanent housing does not occur within the period of 3 years after the property enters the fund, the fund must request the assessment of the Property Transfer Tax that was not assessed. However, this was not the case at hand [...]. The Property Transfer Tax and Stamp Duty assessments in question were not based on its maintenance in the fund for a period equal to or greater than 3 years without allocation to rental for permanent housing having occurred. [...]. Indeed, the assessments in question, as follows from the assessment notices joined to the case, were based on the fact that the properties had been given "a destination different from that which constituted the basis for the benefit" [see also, in the case of the present case file, the same description, which appears in the documents contained in Doc. 1 attached to the case file]. Accordingly, we consider that the issue of retroactivity, or otherwise, of the norm applied does not arise".

In fact, it is sufficiently demonstrated that the property in question was disposed of in 2015, with the consequent allocation of the same to a purpose different from that for which the exemptions were granted. This is not, therefore, a matter of timing, as the Claimant alleged.

In this respect, and as also well noted in Arbitral Decision dated 2/5/2016, issued in proc. 689/2015-T, "the disposal of the property would always give rise to the expiry of the exemption by application of the provisions of n.º 3 of article 14.º of the Fund Statute, not being, therefore, at issue, in the situation under consideration, any retroactive application of a norm that introduces a new regime of expiry of the exemptions, nor does there exist any frustration of the expectations of the Claimant or worsening of its tax position, so we accordingly consider that the Property Transfer Tax and Stamp Duty assessments in question are legal. Thus, the analysis of the issue raised by the Claimant regarding the alleged retroactivity of the regime provided for in article 236.º of the State Budget Law for 2014 is rendered moot to the extent that, as demonstrated above, the circumstances giving rise to the tax assessments in question are in no way related to the amendments brought about by the said article, being concerned only with the disposal of the property and consequent allocation to a purpose different from that for which the Property Transfer Tax and Stamp Duty exemptions were granted."

For the reasons noted, with which agreement is had, it is concluded – also in the present case – that the analysis of the issue of the alleged retroactivity of the regime contained in article 236.º is rendered moot, and that no unjustified breach of the expectations of the present Claimant or unjustified worsening of its tax position occurred as a result of the assessments in question. In these terms, it is concluded, consequently, that the Property Transfer Tax and Stamp Duty assessments in question should be maintained entirely within the legal order.

Note, finally, and as a closing note, that, in the present case, there would never be at issue the (also alleged by the Claimant) nullity for breach of "essential content of a fundamental right" [see §32 to §38 of the initial petition], since, as has been uniform understanding of the case law of the Superior Administrative Court, the vice of breach of law due to error in the premises of law (which is what could be at issue here) generates mere voidability, unless the tax act was contrary to the content of a fundamental right (a situation which clearly is not at issue here) – which is not the case even if there has been a breach of the principles of tax legality or non-retroactivity of tax law (see, in this respect and merely by way of example, the following judgments of the Superior Administrative Court: n.º 1709/03, of 28/1/2004; n.º 1938/03, of 3/3/2004; n.º 1259/04, of 22/5/2005; n.º 669/05, of 9/11/2005; n.º 612/05, of 23/11/2005; n.º 231/13, of 26/6/2013; n.º 481/13, of 26/2/2014; n.º 1916/13, of 12/3/2014; n.º 703/14, of 21/1/2015).

See, also, in the same sense, the following excerpt from the judgment of the Central Administrative Court of Appeal of 26/3/2015 (proc. 00354/08.0BEPRT): "It alleges [...] the Appellant [that the tax in question] is null for [...] breach of the essential content of a fundamental right. It follows from the provisions of article 133.º, n.ºs 1 and 2, paragraph d), of the Administrative Procedure Code applicable ex vi of 2.º, paragraph c), of the GTL, that acts for which any of the essential elements are missing are null or for which the law expressly provides such form of invalidity, in particular acts which breach the essential content of a fundamental right. It is not well founded [in the Appellant]. Acts which breach a fundamental right must be those which conflict with the rights, freedoms and guarantees of citizens; not those which conflict only with the principle of legality, as occurs in the case at issue. [...] it is settled in the case law of tax litigation that the nullity of a norm on which an assessment act is based does not imply the nullity of the latter, generating only a situation of abstract illegality of the assessment [...] (cf. in that sense, among many others, the judgments of the Superior Administrative Court of 25/05/2004, proc. n.º 208/04, 9/11/2005, proc. 669/05, 7.05.2008, proc. n.º 1034/07, of 5.07.2007, proc. n.º 479/06, of 16/09/2009, proc. n.º 0418/09, and of 23/10/2013, proc. n.º 0579/13). Accordingly, the tax act that applies allegedly unconstitutional norms [...] does not give rise to the nullity of the assessment, but generates mere voidability, with a vice of breach of law due to error in the premises of law at issue."

1. In accordance with article 43.º, n.º 1, of the GTL, compensatory interest is owed when it is determined, in gracious reclamation or legal challenge, that there has been error attributable to the services from which there results payment of tax liability in an amount greater than that legally due.

It is, therefore, a necessary condition for the award of said interest the demonstration of the existence of error attributable to the services. In that sense, see, for example, the following judgments: "The right to compensatory interest provided for in n.º 1 of article 43.º of the GTL [...] depends on it having been demonstrated in the case that such act is affected by error in the premises of fact or law attributable to the TA." (Judgment of the Superior Administrative Court of 30/5/2012, proc. 410/12); "The right to compensatory interest provided for in n.º 1 of article 43.º of the General Tax Law presupposes that it be determined in the case that in the assessment 'there was error attributable to the services', understood as the 'error in the premises of fact or law attributable to the Tax Administration'" (Judgment of the Superior Administrative Court of 10/4/2013, proc. 1215/12).

Now, as there has been, as follows from what was said in 1), no error attributable to the services, it is concluded that the claim for payment of compensatory interest to the Claimant lacks merit.

V – DECISION

In light of the foregoing, it is decided:

• To judge the application for arbitral pronouncement to lack merit, with the assessments now challenged being maintained entirely within the legal order, and accordingly absolving the Respondent entity of the claim.
• To judge the claim to lack merit also in the part relating to the recognition of the right to compensatory interest in favour of the claimant.

The value of the case is set at €38,386.00 (thirty-eight thousand three hundred eighty-six euros), in accordance with article 32.º of the CPTA and article 97.º-A of the CPPT, applicable by force of the provisions of article 29.º, n.º 1, al. a) and b), of the LRTA, and article 3.º, n.º 2, of the Regulation of Costs in Tax Arbitration Proceedings (RCPAT).

Costs to be borne by the Claimant, in the amount of €1,836.00 (one thousand eight hundred thirty-six euros), in accordance with Table I of the RCPAT, and in fulfillment of the provisions of articles 12.º, n.º 2, and 22.º, n.º 4, both of the LRTA, and the provisions of article 4.º, n.º 4, of the said Regulation.

Notify.

Lisbon, 16 June 2016.

The Arbitrator

(Miguel Patrício)

Text prepared by computer, in accordance with the provisions of article 131.º, n.º 5, of the Code of Civil Procedure, applicable by reference of article 29.º, n.º 1, al. e), of the LRTA.

The wording of this decision is governed by the spelling prior to the Orthographic Agreement of 1990.