IMT Exemption for Tourist Utility Under Decree-Law 423/83 – CAAD Arbitration 622/2014-T

ARBITRATION DECISION

I – REPORT

1. On 14 August 2014, the company A, S.A., holder of tax identification number …, with registered office in … and, subsidiarily, Bank B, S.A., holder of tax identification number …, with registered office at Avenue … Lisbon (hereinafter referred to as the "Claimant"), submitted to the Administrative Arbitration Centre (CAAD) a request for constitution of an arbitral tribunal with a view to obtaining an arbitral decision, in accordance with the provisions of articles 2, no. 1, paragraph a) and 10 of Decree-Law no. 10/2011, of 20 January (hereinafter referred to as RJAT), following the act of tacit dismissal of the Gracious Complaint no. …, of the tax act for assessment of Municipal Tax on Onerous Transfer of Real Estate (IMT), extracted for payment through payment form no. …, issued by the Tax Office of …, in the amount of € 35,774.12 (thirty-five thousand, seven hundred and seventy-four euros and twelve cents).

2. In the request for arbitral decision, the Claimant chose not to appoint an arbitrator.

3. In accordance with no. 1 of article 6 and paragraph b) of no. 1 of article 11 of the RJAT, with the amendment introduced by article 228 of Law no. 66-B/2012, of 31 December, the Deontological Council appointed as sole arbitrator the undersigned Jorge Carita, who accepted the position within the legally prescribed deadline.

4. The arbitral tribunal was constituted on 17 October 2014.

5. On 24 November 2014, the Respondent, duly notified to that effect, submitted its response.

6. On the same date as the response, the Respondent proceeded to attach the administrative tax file.

7. The meeting provided for in article 18 of the RJAT was held on 23 February 2015.

8. The position of the Claimant, expressed in the request for arbitral decision, as well as in the written final allegations, is, in summary, as follows:

8.1. On 20.12.2005, C purchased from company D, S.A., fraction T of the urban property, registered in the urban property matrix of the parish of … under no. …, integrated in the Tourist Enterprise "…", for the price of € 550,371.00 (five hundred and fifty thousand, three hundred and seventy-one euros).

8.2. This act was subject to IMT exemption by the notary, under no. 1 of article 20 of Decree-Law no. 423/83, of 5 December.

8.3. It so happened that the Tax and Customs Authority (AT) understood that the tax benefit concerning tourist utility was improperly granted, thus resulting in the failure to pay the IMT relating to that same acquisition, in the amount of € 35,744.12, as per the additional assessment issued by the Tax Office of …, at the rate of 6.5%, on the base price attributed to the right acquired in the amount of € 550,371.00.

8.4. The Claimant disagrees with the position assumed by the AT, not accepting the assessment act subject to the present arbitral decision, because it considers it manifestly illegal, since the correction base that precedes and supports it is wrong and illegal.

8.5. On the same day 20.12.2005, C entered into, with Claimant A, a Financial Real Estate Lease Contract, having as its object the fraction in question. With regard to this contract, as well as to the purchase and sale contract, it was always assumed by the parties that the operation in question would benefit from IMT exemption, provided for in article 20 of Decree-Law no. 423/83, of 5 December. The seller company itself of the fraction (D, S.A.) always stated that the sale would be made with the said IMT exemption, and this granting of the exemption was fundamental to the decision to acquire the fraction.

8.6. Moreover, notwithstanding the public deed making express mention of the exemption, and the fact that the notary confirmed and consented to it, a tourism exploration contract was entered into with Claimant A and E, S.A., a company operating the Hotel and tourist apartments that make up the tourist complex "…", in the terms of which it ceded to this company the exclusive right of exploration of the fraction, leaving Claimant A, as the grantor, subject to a set of obligations that restrict the free enjoyment of its asset, for the benefit of the tourism and commercial exploitation of the same.

8.7. The Claimant submits that the tax benefit contained in article 20 of Decree-Law 423/83, aims to benefit those who promote the process of establishing tourism enterprises of utility, not those who merely engage in the activity of operating the same. Even because article 20 does not grant the exemption to the constructor of the enterprise, the real estate developer, or the entity that licenses and/or operates the enterprise. In fact, it is an exemption aimed at benefiting the realization of the process of establishing tourism enterprises of utility.

8.8. Therefore, the AT makes an incorrect interpretation of the regulation in question, when it states that the acquisition of the fraction by the Claimant was not intended for the establishment of the said enterprise, since it was already established. That is, from the scope of the rule applied, in the AT's view, tourism enterprises qualified as utility that are already established, which are not subject to remodeling or expansion, would be excluded, and would consequently not be applicable to the case at hand.

8.9. However, the Claimant submits that only with the acquisition and the concomitant entering into of the tourism exploration contract with the operating entity, the autonomous fraction became capable of functioning as an accommodation unit for users of the tourism enterprise. In this sense, the assessment under consideration is illegal and should be annulled, since the correct reading and systematically integrated interpretation of the said article 20 of Decree-Law no. 423/83, is that within its scope should be considered the operations of acquisition of the fractions that compose the enterprise classified as of tourist utility, to the extent that the actions of these acquirers complement the process of establishing the enterprise at the service of the Portuguese tourism sector.

8.10. The Claimant further refers that the introduction of article 20 of Decree-Law 423/83, in our legal system, should not be understood as a benefit that covered only real estate developers, since these already had their own mechanisms to mitigate the weight of taxation in the acquisition of land where buildings were erected, in accordance with article 39-A of the Code of Municipal Property Transfer Tax and Tax on Succession and Donations (CIMSISSD).

8.11. As for the exemption for owners in the context of Municipal Property Tax (IMI), in accordance with article 47, no. 1 of the Tax Benefits Statute (EBF), the Claimant also submits that the AT should have the same consistency in applying this benefit to the owners of the fractions and in that which derives from article 20 of Decree-Law no. 423/83, since the benefit established in article 47 of the EBF is applicable to the acquirers of fractions integrated in enterprises classified as being of tourist utility, and has never been contested by the AT.

8.12. It is further added that the Claimant, as owner of the fraction, presents itself as a true real estate developer, whom the AT wants to restrict the tax benefit contained in article 20 of Decree-Law no. 423/83, to the extent that it directly intervened in the financing and establishment of the enterprise under analysis.

8.13. It is important to note the violation of the principles of legal certainty and security and the double degree of control of legality by the notary and by the registry office, since the Claimant, even acting in accordance with the law and trusting in the validation of its action that was conferred upon it by the public entities with powers of public control that directly intervened in the operation in question (notary and AT), was confronted with a tax assessment, violating all legal provisions where the principle of good faith is enshrined, articles 266 of the Portuguese Constitution, 6-A, no. 1 of the Code of Administrative Procedure (CPA) and 59 of the LGT.

8.14. Finally, the revocation of an automatic tax benefit, which gives rise to the additional IMT assessment, now subject to arbitration, is an illegal act. This is because the tax benefit that derives from article 20 of Decree-Law no. 423/83 is an automatic benefit, which stems directly from law, and because it was not contested or revoked in due time by the AT, in accordance with articles 140 and 141 of the CPA, it became consolidated in the sphere of the Claimant. Therefore, the AT cannot proceed to revoke the granting of the tax benefit in question.

1. The position of the Respondent expressed in the response, as well as in the counter-allegations, is, in brief summary, as follows:

9.1. First of all, the Respondent defends itself by exception regarding the legitimacy of the Claimant, by understanding that it does not have standing for the present arbitral decision, in accordance with article 4 of the IMT Code and article 18, no. 4 paragraph a) of the LGT. Therefore, the Arbitral Tribunal should consider that the Claimant is a party lacking legitimacy due to lack of legal basis for the intended procedural standing. And also regarding the expiration of the right to gracious complaint – whose tacit dismissal constitutes the immediate object of the proceedings – and consequent expiration of the right to challenge regarding the present request for arbitral decision.

9.2. Nevertheless, the Respondent alleges that the legislator only intended to cover acquisitions intended for the establishment of enterprises with the norm of article 20 of Decree-Law no. 423/83. This is what clearly results from the literal element when interpreting the norm, because if the legislator wanted to cover the activity of establishment and the activity of operating tourism enterprises, it would have been clear as it was in article 16 of the same decree, the normative of which intended to benefit both owner and operating companies, similar to what happens with no. 2 of article 20.

9.3. The concept of "establishment" contained in article 20 of Decree-Law no. 423/83, in the Legal Framework for the Establishment, Operation and Operation of Tourism Enterprises (RJIEFET, Decree-Law no. 39/2008, of 7 March) results in a clear distinction between the concepts of "establishment", on the one hand, and "operation" and "functioning", on the other.

9.4. The acquisition made by the Claimant, already at a moment subsequent to the operating license and, consequently, after the establishment phase of the tourism enterprise, was intended for commercial operation and not for "establishment". Although the accommodation units that make up the tourism enterprise can be constituted as autonomous fractions, these accommodation units are always considered in tourism operation, hence their acquisition is intended for operation and not for implantation.

9.5. Based on the judgment standardizing jurisprudence of the STA, no. 3/2013 of 23.01.2013, the Respondent refers that, in accordance with the RJIEFET, there are two distinct procedures, one relating to the practice of operations necessary to establish the enterprise, another relating to operations necessary to put it into operation and to operate it, and the sales of the projected or constructed units necessarily form part of the second moment. And also, one cannot conceive that the Claimant becomes a co-financier of the enterprise, with responsibility for establishment, since it is investing in real estate products within the so-called residential tourism.

9.6. The Respondent concludes, transcribing part of the judgment standardizing jurisprudence, that the benefit only has justification in relation to those who proceed to the establishment of the enterprise and place it on the market and not in relation to all those who use and operate it, even if through the purchase of its units, so the acquisition in question does not benefit from the IMT exemption provided for in no. 1 of article 20 of Decree-Law 423/83.

9.7. Regarding the articulation of article 20 of Decree-Law no. 423/83 with article 39-A of the CIMSISSD, the Respondent understands that there is no redundancy or anachronism for the reasons already set out.

9.8. Within the scope of the exemption for owners in the context of IMI, the Respondent understands that the arguments of the Claimant lack any legal support, since IMI and IMT are taxes that aim to tax distinct realities, and it is incumbent upon the tax legislator to adopt exceptional measures that it deems appropriate to the pursuit of relevant extra-fiscal public interests and that are superior to that of taxation itself that they prevent.

9.9. Based on the lack of legal support, the Respondent also refers to the violation of the principles of legal certainty and security. If the Claimant wanted to bind the AT to some understanding, it had its own legal mechanisms, particularly the request for binding tax ruling, and it was incumbent upon it to ensure the legal certainty it invokes, which it did not do at all. Even so, article 45, no. 1 of the LGT, combined with no. 1 of article 35 of the IMT Code, tells us that the right to the assessment of the missing tax is only extinguished if the same is not validly notified to the Claimant within 8 years from the acquisition, therefore, the Respondent was not prevented from assessing the missing tax.

9.10. As for the illegal revocation of the tax benefit already granted and consolidated in the sphere of the Claimant, in the specific case it has no application whatsoever, since what concretely results is a tax assessment, carried out under article 35 of the IMT Code, due to the Claimant not meeting the legal requirements of the desired exemption, as verified by the tax audit.

9.11. The Respondent concludes by the lack of merit of the request for arbitral decision filed, being evident the legal conformity of the act subject to the present proceedings.

II – ISSUES TO BE DECIDED

1. In view of the foregoing, in the preceding numbers, the main issue to be decided is as follows:

a) Following the act of tacit dismissal of the Gracious Complaint no. …, the tax act for assessment of Municipal Tax on Onerous Transfer of Real Estate (IMT), extracted for payment through payment form no. …, in the amount of € 35,774.12 (thirty-five thousand, seven hundred and seventy-four euros and twelve cents), from the Ministry of Finance, Tax and Customs Authority, Tax Office of …, suffers from error in the factual and legal premises, by incurring the vice of violation of law.

III – CLARIFICATION

1. The Tribunal is regularly constituted and is materially competent, in accordance with articles 2, no. 1, paragraph a), 5, no. 2, and 6, no. 1, of the RJAT.

2. In the response submitted by the Respondent, in accordance with article 17, no. 1 of the RJAT, two exceptions were raised (i) illegitimacy of the Claimant, by understanding that it does not have standing for the present arbitral decision, in accordance with article 4 of the IMT Code and article 18, no. 4 paragraph a) of the LGT, and (ii) expiration of the right to gracious complaint and consequent expiration of the right to challenge regarding the present request for arbitral decision.

3. Analyzed the initial petition submitted by Claimants A and B, it is indeed possible to affirm that the first Claimant (A) is a party lacking legitimacy in the present arbitral proceeding. However, Claimant B has procedural standing, as follows.

4. First of all, we must take into account the following framework. By force of the extinction of company "C", resulting from its merger by incorporation into Bank B, S.A. (B), all rights and obligations of the extinct company (C) were transferred to this company. On the other hand, B gives rise to F, constituted by resolution of the Board of Directors of the Central Bank of Portugal taken at an extraordinary meeting on 03 August 2014, in accordance with no. 5 of article 145-G of the General Regime of Credit Institutions and Financial Companies, approved by Decree-Law no. 298/92, of 31 December, to which assets and liabilities, extra-patrimonial elements and assets under management of B, S.A., were transferred, identified in the said resolution. In these terms, at the meeting of article 18 of the RJAT, the representative of Claimant B was invited to present a power of attorney in the name of F, which it did and is already in the arbitral file.

5. In accordance with article 4 of the IMT Code, under the heading "Subjective Incidence", IMT is owed by natural or legal persons to whom real estate is transmitted. On the other hand, article 18 of the LGT gives us the notion that the active subject is the person to whom the right to require the tax obligation belongs (AT) and passive subject the person bound before the former to its performance. Thus, due to the purchase that C made from company "D, S.A., with NIPC …, on 20.12.2005, by public deed executed at the Notary Office of …, relating to fraction T of the urban property registered in the urban property matrix of the parish of … under no. …, intended for Services, integrated in the tourism enterprise "…", whose value of the transmitted right was € 550,371.00, the IMT assessed based on this price at the rate of 6.5%, in accordance with paragraph d) of article 17 of the IMT Code, is owed by company C.

6. It should be noted that despite the existence of a financial real estate lease contract granted by C and A, where in Clause 4, paragraph 3 a) it becomes responsible for the payment of all charges inherent to the said contract, namely taxes, the same does not produce any change regarding the passive subject of the legal-tax relationship in discussion, in accordance with article 18, no. 4, paragraph a) of the LGT, nor grants any legitimacy to submit the assessment in question to the decision of this arbitral tribunal.

7. For all this, Claimant A is a party lacking legitimacy in the present proceeding. However, since (i) Claimant B appears in the petition for arbitral decision subsidiarily, in accordance with article 39 of the Code of Civil Procedure (CPC), applicable ex vi of article 2 of the CPPT, (ii) it appears as the incorporating company of C and (iii) a power of attorney appears in the file in favor of the Representative who signed the Petition for Arbitral Decision, in representation of F, to which assets and liabilities, extra-patrimonial elements and assets under management of Bank B, S.A., were transferred, we find that Claimant B has procedural standing, which legitimates its intervention in the present arbitral proceeding.

8. With regard to the peremptory exception of expiration of the right to gracious complaint and consequent expiration of the right to action, regarding the request for arbitral decision, we cannot agree with the thesis of the Respondent and absolve it of the instance.

9. The act subject to arbitral decision, following the tacit dismissal of the gracious complaint submitted by the Claimant, is the IMT assessment act. Therefore, the exception raised does not result from an express decision of the AT, as the Respondent seems to understand with the invocation of the Judgment of the TCAS of 2 July 2002, rendered in process no. 6246/02. In this decision, the expiration of the right to file an appeal was decided, since there was a deadline fixed for payment of the assessed amount and the complaint was filed when the 90-day period to do so had already elapsed ("Thus, the deadline for complaint, which was 90 days, began the following day, specifically on 19/12/98 and ended on 18 March 1999. Now, as the complaint was submitted to the services on 31/8/99, this entails the expiration of the right to complain and, by consequence, the preclusion of the right to challenge, since the lapse of the indicated period extinguishes the right that is intended to be exercised (...)"). In the specific case, with the gracious complaint filed by the Claimant, the general duty of pronouncement of the AT, embodied in the duty of decision, was not fulfilled.

10. Tacit dismissal is not an act, but a fiction designed to enable the use of administrative and contentious challenge means, as provided for in no. 5 of article 57 of the LGT. Therefore, as the Claimant chose to file a gracious complaint against the assessment act and no decision was rendered, it only had to wait for the formation of the tacit act of dismissal (cf. no. 1 of article 57 of the LGT, "4 months"), to challenge within the period of 3 months counted from that silent act, with the date of the tacit dismissal of that complaint becoming relevant and not the date of the deadline for voluntary payment of the tax (cf. judgment of the Supreme Administrative Court, Process no. 0449/11, of 12 October 2011). For all this, we cannot agree with the thesis of lack of procedural standing, nor absolve the Respondent of the instance.

11. Indeed, the complaint in question was filed on 21.03.2014, and consequently, the tacit dismissal was formed on 21.07.2014, so the Claimant had until 21.10.2014 to file a challenge to this Tribunal, which it did on 14.08.2014 (cf. article 57, no. 1, 3 and 5 of the LGT, article 279, paragraph c) of the Civil Code, article 102, no. 1 paragraph d) of the CPPT).

Therefore, the request for arbitral decision is timely, in accordance with no. 1 of article 10 of the RJAT.

The parties have legal personality and capacity, are legitimate and are legally represented, in accordance with articles 4 and 10, no. 2, of the RJAT and article 1 of Order no. 112-A/2011, of 22 March.

The proceeding does not suffer from vices that invalidate it.

All having been considered, it is necessary to render the judgment.

IV – FACTUAL GROUNDS

1. In accordance with the minutes of the meeting of article 18 of the RJAT, an order was issued to the effect that the parties pronounce themselves on the need to schedule a new meeting for the performance of witness testimony. Faced with what was requested, the Claimant stated it would forgo the questioning of the witnesses it had listed if the use of witness testimony from Processes no. 102/2014-T and no. 110/2014-T were admitted and the Respondent stated it did not oppose the use of witness testimony. In this sense, this Arbitral Tribunal admitted the said use and consequently granted a period of 5 days for the Claimant to indicate the facts on which it intended to produce witness testimony, which was done in its final allegations, where, in summarized form, it was intended to demonstrate the exact understanding of the contours that led to the implementation of the enterprise in question, as well as explain the assumptions that led to its promotion, from the perspective of the promoting entity and of the acquirers of the fractions.

Given this, taking into account the tax administrative file (PAT), the documentary evidence attached to the file and witness testimony, it is now necessary to present the factual matter relevant to the understanding of the decision, which is set out as follows:

A. The Claimant C acquired, within its activity, on 20/12/2005, fraction T of the urban property, registered in the urban property matrix of the parish of … under no. …, intended for Services, integrated in the Tourism Enterprise "…", located on Avenue …, parish of … and municipality of ….

B. On the same day 20/12/2005, a Financial Real Estate Lease Contract was entered into, having as its object the said fraction, with Claimant A, S.A.

C. On 23 March 2006, Claimant A entered into with E, S.A. a tourism exploitation contract, where, among other things, it ceded the exclusive right of exploitation of the fraction.

D. On 15/06/2005, it was published in Official Gazette, 2nd series, no. 135, Notice of Order from the State Secretary for Tourism, of 2 June 2005, relating to the attribution to the enterprise qualified as Tourism Complex "…", of tourism utility on a provisional basis, to be carried out by company D, S.A..

E. On 11/06/2007, it was published in Official Gazette, 2nd series, no. 135, Notice no. …, the Order from the State Secretary for Tourism of 7 May 2007, confirming the tourism utility, granted on a provisional basis, to the Tourism Complex "…", of which D, S.A. is the representative, for a period of 7 years from the date of issuance of the tourism operating license by the City Council of …, which occurred on 30 September 2005.

F. On 28/06/2013, by Service Order no. …, Claimant C was the subject of an inspection action, which aimed at the control of tax benefits, with the activity code no. ….

G. In the course of the inspection action, referenced above, the AT concluded that the IMT exemption provided for in article 20, no. 1 of Decree-Law 423/83 was improperly recognized by the notary, which resulted in the assessment in question, which concerned the purchase of the real estate referred to, which the now Claimant made from company D, S.A., registered under NIPC …, based on the attributed price of € 550,371.00, at the rate of 6.5%.

H. The IMT assessment was the subject of a gracious complaint on 21 March 2014, via fax, to which was assigned the process number ….

I. The AT did not comply with the 4-month deadline, counted from the date of entry of the Claimant's petition, to conclude the gracious complaint procedure, with its dismissal being presumed for the purposes of challenging on 21 July 2014.

J. On 14 August 2014, the Claimant filed the Petition for Arbitral Decision, when it had until 21 October 2014 to do so.

K. In accordance with the Response and the petition for arbitral decision, tacit dismissal of the mentioned gracious complaint occurred.

1. Regarding the facts stated in the previous number, the documents attached to the file were relevant, the witness testimony from processes no. 102/2014-T and 110/2014-T, as well as the tax administrative file, all analyzed and weighed in conjunction with the pleadings, from which there results agreement as to the factuality presented by the Claimant in the petition for arbitral decision.

2. There are no facts given as not proven, because all facts relevant to the assessment of the petition were given as proven.

V – LEGAL GROUNDS

1. We shall now determine the Law applicable to the underlying facts, in accordance with the question already stated (see above no. 11).

2. Thus, the issue that arises is whether the acquisition of the real estate in question was intended for the establishment of the tourism enterprise "…" or whether it was already established, an enterprise qualified as of tourism utility as required by no. 1 of article 20 of Decree-Law no. 423/83. The correct interpretation and scope to be conferred on the said no. 1 of article 20 is decisive to determine whether the exemption provided therein is applicable to the situation sub judice, specifically regarding the acquisition of the autonomous fraction T, of the urban property under a horizontal ownership regime, integrated/inserted in the tourism enterprise "…".

First, it is important to understand what no. 1 of article 20 of Decree-Law no. 423/83, of 5 December, tells us:

"Acquisitions of real estate or autonomous fractions intended for the establishment of enterprises qualified as of tourism utility are exempt from tax on property transfer and tax on succession and donations, with the stamp tax reduced to one-fifth, even if such qualification is granted on a provisional basis, provided that this remains valid and the deadline fixed for the public opening of the enterprise is observed."

1. Decree-Law no. 423/83, with the amendment introduced by Decree-Law no. 38/94, of 8 February, regulates the institute of tourism utility.

2. In its preambles, it is stated that this institute is "one of the most effective instruments for the development of the sector" and is "an appropriate instrument to support companies that operate tourism enterprises considered essential to the pursuit of tourism policy laid down by the Government".

3. Therefore, it seems to us from the outset clear that the legislator intended to grant benefits to those who make investments in the tourism sector in Portugal, which is desired to be of quality, foreseeing the existence of tax benefits only for those who acquire with a view to the establishment of tourism establishments of utility, implementing the establishment or participating in it, and not already to those who merely acquire fractions belonging to already established enterprises. And, furthermore, that article 20, no. 1, of Decree-Law no. 423/83 does not state that the exemptions provided therein are due to the constructor of the enterprise, or to the real estate developer or to the entity that licenses and/or operates the enterprise. Simply, it is mentioned that the real estate (property or autonomous fraction) has been "intended for the establishment of enterprises qualified as of tourism utility", and that this remains valid and that the deadline for public opening of the enterprise in question is observed.

4. Therefore, the determining element to decide whether the acquisition of the real estate by the Claimant falls within article 20, no. 1 of Decree-Law no. 423/83 is the concept of "establishment" enshrined in that article.

5. However, as Decree-Law no. 423/83 does not give us the definition of this concept, we should take into account what was provided regarding the establishment and operation of tourism enterprises at the date of the facts, that is, at the date of the deed of purchase and sale of the real estate (20.12.2005). In this sense, the legal regime contained in Decree-Law no. 167/97, of 4 July, applied. This legal diploma defined in its article 9 that "Establishment" of tourism enterprises was "the licensing of the construction and/or use of buildings intended for the operation of those enterprises." (cf. article 9).

6. That legal diploma also provided that accommodation units could be withdrawn from the operation of tourism enterprises (cf. article 45, no. 3).

7. From the analysis of the proven facts, it results that the enterprise is constituted under a horizontal ownership regime. Indeed, the autonomous fraction acquired by the Claimant constitutes an accommodation unit of the tourism complex "…" and is integrated into a tourism enterprise to which tourism utility was recognized.

8. In accordance with Decree-Law no. 167/97, of 4 July, the autonomous fraction in question was designated as an immovable fraction, considered a component part "of tourism enterprises capable of constituting distinct and independent units, duly delimited, whether or not intended for the common use of users of the enterprise…" (cf. no. 1 of article 46).

9. On the other hand, "accommodation units of tourism enterprises only constitute immovable fractions when, in accordance with general law, they are considered autonomous fractions or as such may be considered." (cf. no. 2 of article 46).

10. Integrated the fraction in question in this legal regime, as has already been said, Decree-Law no. 167/97 provided for the possibility of accommodation units being withdrawn from the tourism enterprise, but the Claimant, through the tourism exploitation contract with the operating entity, not only prepared in terms of furniture structure (e.g., the Claimant assumed the obligation to ensure that the real estate had high-level furnishings, furniture and equipment for tourism needs, inherent to the quality and tourism classification of the real estate and considering the maximum capacity of people who might occupy it, cf. Clauses 4 and 5 of the Tourism Exploitation Contract, fact proven C), but also integrated it into the tourism enterprise "…", whose definitive establishment depended, also, on this integration. Indeed, the exemption of no. 1 of article 20 of Decree-Law no. 423/83, is directed to acquisitions of real estate or autonomous fractions intended for the establishment of enterprises classified as of tourism utility.

11. If the Claimant had opted for the autonomy of its fraction in relation to the enterprise, as the legal regime in force at the time provided (cf. article 45, no. 3 of Decree-Law no. 167/97), it would certainly have put at risk the maintenance of tourism utility, as it was granted. What only demonstrates that the acquisition here in question contributed decisively to the establishment of the tourism enterprise "…".

12. It is also worth noting what the Arbitral Tribunal constituted under Process no. 122/2014-T correctly decided on identical factual matters and with a view to the interpretation and application of the same legal norms, "The concept of establishment in no. 1 of article 20 of DL 423/83, for the specific case, must be found in light of the legal system then in force, namely the aforementioned DL 167/97, which in its preamble tells us about the promoter as follows: "…the promoter is the first responsible for compliance with the rules respecting the enterprises, as this compliance will only be evaluated for the purposes of classification and not for the entry into operation of the enterprise. This means that the enterprise enters into operation at the responsibility of the promoter, as if there is a modification of the provisional classification that had been attributed to the enterprise, this will only result from non-compliance with the rules that the same knows …";" (cf. Process no. 122/2014-T).

13. In the sense that we have been following, we cannot accept the position of the Respondent, because it is not acceptable to affirm that the exemption provided for in article 20, no. 1 of Decree-Law no. 423/83 is directed to the real estate developer, when in this article there is no mention of the developer, nor the constructor, nor is any other requirement made other than that the acquisition be intended for the establishment of a tourism enterprise qualified as of tourism utility. The acquisition of the fraction in question formed part of the process of establishing the enterprise "…", that is, in the terminology used by the AT "first acquisition" and its non-inclusion not only would distort the enterprise, but it is certain that could jeopardize the recognition of tourism utility, granted on a provisional basis.

14. Indeed, the enterprise will only be definitively established when all accommodation units begin their operation, with the first acquisition of each fraction being integrated in this process of establishing the enterprise.

15. This is what appears most consistent, both with the letter and with the spirit of the law, and also with the systematic interpretation of the norm contained therein.

16. Furthermore, the tax benefit in question, in accordance with article 2 of the Tax Benefits Statute, is an exceptional measure instituted for the protection of relevant extra-fiscal public interests and superior to those of taxation itself that it prevents.

17. As we mentioned earlier, the regime of tourism utility was created to encourage the creation of quality Portuguese tourism supply, recognized by the Portuguese government through the institute of tourism utility, this as a factor to promote tourism investment and a means of correcting existing regional asymmetries and, above all, to increase the acquisition of quality tourism real estate products for investment, given the importance and value of this product for the national economy.

18. The acquisition of quality tourism real estate investment products clearly generates more internal revenue and increases the employment rate in Portugal.

19. Thus, and making a parallel to the specific case, being concerned with a tourism enterprise in which each autonomous fraction constitutes a functional element – accommodation unit – we can affirm that the holders of these elements make possible the progressive establishment and operation of the enterprise with recognized tourism utility, that invest in the creation/establishment of quality Portuguese tourism real estate supply recognized by the Portuguese government. The norm of article 20, no. 1 of Decree-Law no. 423/83, only makes sense if we consider that the first acquisition of each of these accommodation units, because intended to make possible the entry into operation of each of them and, consequently, of the enterprise as a whole, falls within the process of establishment of the enterprise, thus meeting the legal conditions to enjoy the tax benefit in question in these proceedings.

20. In these terms, we cannot accept the thesis of the Respondent, that only the promoter who acquires a real estate to construct a tourism enterprise or to carry out improvement works makes tourism investments, an understanding that does not arise from article 20, no. 1 of Decree-Law no. 423/83.

21. Therefore, necessarily, from this follows the annulment of the tax act in question in the present arbitral proceedings.

22. Next, we understand that we should also take into account what is currently provided regarding the establishment, operation and operation of tourism enterprises, enshrined in Decree-Law no. 39/2008, of 7 March, although it is not applicable to the specific case, as it entered into force in the legal system after the transmission of the real estate referenced in the present arbitral proceeding. However, in all respects it resembles. The importance of this analysis is also due to the fact that there is, on the interpretation and scope to be conferred on no. 1 of article 20, a decision taken uniformly by the Tax Litigation Section of the Supreme Administrative Court, following the enlarged judgment, held pursuant to the provisions of article 148 of the Code of Procedure in Administrative Courts (CPTA), in process no. 968/12, which gave rise to the standardizing judgment of jurisprudence no. 3/2013, of 23 January 2013, published in the 1st Series of the Official Gazette, of 4 March 2013, pages 1197 to 1217.

23. The mentioned standardizing judgment of jurisprudence, came to determine the scope of the concept of "establishment", for purposes of the exemption of no. 1 of article 20 of Decree-Law no. 423/83, of 5 December, which concludes to the effect that "this concept cannot fail to be understood as referring precisely to the acquisition of real estate (or autonomous fractions) for construction (when it comes to new enterprises) of tourism enterprises, after the respective urban operations have been duly licensed, aiming to benefit companies engaged in the activity of promotion/creation of the same.".

24. In light of the position taken by the Supreme Administrative Court, with all due respect, we cannot fail to conclude that we prefer to follow the dissenting vote expressed by some Illustrious Counselors in that decision.

25. In fact, in accordance with the current legal regime of tourism enterprises, approved by Decree-Law no. 39/2008, of 7 March, what is at issue here is not a hotel establishment, but a tourism complex composed of multiple accommodation units subject to the plural ownership regime, provided for in article 52 of that diploma. In this type of enterprise there is not a single right of ownership, but a plurality of ownerships, as many as there are individualized and autonomous accommodation units that, taken together, constitute the enterprise. This is the conclusion that is drawn from the notion of tourism enterprise in plural ownership contained in article 52 of Decree-Law 39/2008, as well as from the regime of Decree-Law no. 167/97, in its article 47, no. 1, where in relations between owners of various immovable fractions of tourism enterprises the horizontal ownership regime was applicable.

26. On this matter, it is important to bring to the fore the position defended by Cristina Siza Vieira, when she states that "tourism enterprises in plural ownership are neither cases of co-ownership, nor pre-existing situations in which various owners of distinct accommodation units cede their operation to a third party and enter into a management contract with it. Rather, they are tourism enterprises to be established or installed in fractional form and where it is intended, from the outset, to sell or come to sell the autonomous fractions or lots intended for accommodation units" (cf. in Plural Ownership and Management of Tourism Enterprises, Themes CEDOUA: Tourism Enterprises" of the Center for Studies of Urban Order and Environment, Faculty of Law of the University of Coimbra, Almedina, page 185).

27. There is indeed a deprivation of the right of ownership, in which, by force of the tourism exploitation contract that Claimant A assumed, as grantor, before E, a set of obligations that restrict the free enjoyment of its asset, "the holders of accommodation units cannot use, enjoy and dispose of them fully and exclusively. Thus, they cannot directly exploit the thing that belongs to them, cannot enter into lease or use and habitation contracts or others that compromise the tourism use of their accommodation unit (no. 6 of art. 45); must allow access to the fraction by the operating entity of the tourism enterprise, so that it can lease it, provide services, conduct inspections, repairs, carry out conservation and replacement work (no. 3 of article 57); cannot carry out work, even internally, without authorization from the operating entity (no. 2 of article 57); and can only use their fraction in the terms fixed in the contract they enter into with the operating entity. The violation of any of these obligations – the exploitation of accommodation units by the owners or the entering into contracts in violation of article 45 - is considered so detrimental to the public interest that it entails, in addition to the penalties that may be established in the Constitutive Title, its qualification as an administrative offense (cf. paragraph o) of no. 1 of art. 67)." (cf. cited work, pages 186 and 187).

28. In this regard, Sandra Passinhas states that "accommodation units are, in accordance with article 45 of the RJIEFET, permanently under the tourism operation regime, with the operating entity having to assume the continuous operation of all of them, even when occupied by their respective owners.

29. In this case, the owners enjoy the mandatory services of the enterprise category, which are covered by the periodic provision provided for in article 56." (cf. Tourism Enterprises in Plural Ownership, Themes CEDOUA: Tourism Enterprises" of the Center for Studies of Urban Order and Environment, Faculty of Law of the University of Coimbra, Almedina, page 198 et seq.).

30. Thus, it is mandatory to allocate all accommodation units composing and integrating the enterprise to tourism operation.

31. As we have seen, under the regime of Decree-Law 167/97, provision was made for the possibility of withdrawal from tourism operation of immovable fractions/accommodation units composing some categories of tourism enterprises. However, both the violation of the obligations imposed by tourism exploitation contracts and the withdrawal of fractions from tourism operation put the enterprise as a whole at risk.

32. Following closely the dissenting vote of the Illustrious Counselor Dulce Neto, in the Judgment of the STA invoked "What, in the case of tourism enterprises in plural ownership, presupposes not only the construction and licensing of the accommodation units that integrate the immovable complex and the establishment as an organizational unit, namely the obtaining of the respective Tourism Operating License, but also that these accommodation units are in conditions to operate as such, that is, for the mandatory services of the category assigned to the enterprise to be provided therein, which inevitably implies that they have been marketed by the real estate promoter, as only its owner/acquirer has the power-duty to enter into the mandatory tourism exploitation contract (art. 45 et seq. of the RJIEFET) to make possible the opening of the accommodation unit to the tourism activity to which it is intended as part of the enterprise in which it is integrated.".

33. Indeed, "only after the marketing of each accommodation unit do these become fit to function as parts of the enterprise, become fit to function and to be operated touristically with their rental to tourists, that is, will be able to function and open to the public as parts of the organizational unit that is the enterprise, so that this can provide the accommodation services to which it is intended. And because this marketing is gradual, the establishment progressively installs itself as the accommodation units are sold, which is consistent with the provision contained in no. 8 of art. 30 of the RJIEFET which precisely provides for the possibility of phased installation of tourism enterprises.".

34. A position to which we fully adhere.

35. Based on all the foregoing, we conclude that the acquisition of the autonomous fraction in question, as an accommodation unit of the tourism enterprise "…", is still part of the process of establishment of this enterprise, meeting the legal conditions to benefit from the IMT exemption, provided for in no. 1 of article 20 of Decree-Law no. 423/83, of 5 December, given the tourism utility recognized to this enterprise by the State Secretary for Tourism, on 7 May 2007 and which covers all units that compose it.

VI – JUDGMENT

Therefore, this Arbitral Tribunal decides:

a) To adjudge the alleged vice of violation of law, for error in the factual and legal premises, regarding the tax act for assessment of Municipal Tax on Onerous Transfer of Real Estate (IMT), extracted for payment through payment form no. …, in the amount of € 35,774.12 (thirty-five thousand, seven hundred and seventy-four euros and twelve cents), from the Ministry of Finance, Tax and Customs Authority, Tax Office of …, as having merit, annulling it in its entirety.

b) To condemn the Respondent to refund the amount improperly assessed and paid in the amount of € 35,744.12 (thirty-five thousand, seven hundred and forty-four euros and twelve cents).

c) To further condemn the Respondent, since we are dealing with a vice relating to the tax legal relationship, as the existence of this vice implied the injury of a legal right situation, embodied in the imposition upon the Claimant of the effectuation of a patrimonial obligation contrary to law, to the payment of indemnity interest, in the terms and conditions provided for in law (cf. article 100 of the LGT and article 61 of the CPPT).

The value of the proceeding is fixed at € 35,744.12, in accordance with article 97-A, no. 1, a), of the Code of Procedure and Tax Procedure, applicable by force of paragraphs a) and b) of no. 1 of article 29 of the RJAT and of no. 2 of article 3 of the Regulation of Costs in Tax Arbitration Proceedings.

The amount of costs is fixed at € 1,836.00, in accordance with Table I of the Regulation of Costs in Tax Arbitration Proceedings, to be paid by the Tax and Customs Authority, since the petition was fully successful, in accordance with articles 12, no. 2, and 22, no. 4, both of the RJAT, and article 4, no. 4, of the cited Regulation.

Let notice be given.

Lisbon, 3 June 2015.

The Arbitrator

(Jorge Carita)