IMI Exemption for Classified Heritage Properties Under Article 44(1)(n) EBF – CAAD Case 643/2018-T

ARBITRAL TAX DECISION

REPORT

1. On 19 December 2018, A..., S.A., NIPC ..., with registered office at ..., no. ..., in Lisbon, hereinafter referred to as the Claimant, requested the establishment of an arbitral tribunal and filed a petition for arbitral pronouncement, pursuant to paragraph a) of section 1 of article 2 and paragraph a) of section 1 of article 10 of Decree-Law no. 10/2011, of 20 January (Legal Framework for Arbitration in Tax Matters, hereinafter referred to as LFATM), in which the Tax and Customs Authority (hereinafter referred to as TCA) is named as the Respondent.

2. The Claimant is represented, in the present proceedings, by her attorney, Dr. D..., and the Respondent is represented by legal advisors, Dr. B... and Dr. C....

3. By means of the petition for establishment of the arbitral tribunal and for arbitral pronouncement, the claimant seeks a declaration of the illegality of the acts of assessment of Municipal Property Tax (IMI), relating to the years 2013, 2014, 2015 and 2016, in the amount of €17,753.02 (seventeen thousand, seven hundred and fifty-three euros and two cents) levied on the property registered under article ... of the Union of parishes of ... (..., ..., ... and ...), arising from the urban property article ... of the parish of ..., with its consequent annulment, and the revocation of the dismissal decisions of the petition for official review of the aforementioned assessment acts and the payment of compensatory interest.

4. Having verified the formal regularity of the petition presented, pursuant to the provisions of paragraph a) of section 2 of article 6 of the LFATM, and the Claimant not having proceeded to appoint an arbitrator, the undersigned was designated by the President of the Deontological Council of CAAD, who accepted the appointment.

5. The present tribunal was established on 28 February 2019, at the headquarters of CAAD, located at Av. Duque de Loulé, no. 72 A, in Lisbon, as confirmed by the communication of the singular arbitral tribunal which is attached to the present proceedings.

6. After being duly notified, the Respondent submitted its response on 1 April 2019.

7. By order of 4 April 2019, the Tribunal notified the Claimant to indicate the factual matters on which it intended witness evidence to be produced, and the Claimant, by petition submitted on 16 April 2019, provided the requested information.

8. On 18 April 2019, the Respondent submitted a petition in which it expressly opposed the examination of the witnesses listed regarding the factual matters indicated by the Claimant.

9. By order of 24 April 2019, the Tribunal, taking into account the petitions submitted by the Claimant and Respondent on 16 and 18 April 2019, respectively, and noting that the production of witness evidence requested by the former appeared unnecessary given all the documentation and other information brought into the proceedings, and as the matter in question involved exclusively legal issues, rejected the production of such evidence.

10. In the same order and taking into account the absence of need for production of additional evidence beyond that already incorporated in the proceedings, with the proceedings containing all necessary elements for pronouncement of the decision, for reasons of procedural economy and expedience, and the prohibition on the conduct of useless acts, the Tribunal decided to dispense with the holding of the meeting provided for in article 18 of the LFATM, granting successive periods of 10 days for the Claimant and Respondent, in that order, to present their respective written submissions, designated, in compliance with the provisions of section 2 of article 18 of the LFATM, 28 August 2019 as the date for pronouncement of the arbitral decision, and warned the Claimant that it should proceed with payment of the subsequent arbitral fee, pursuant to section 3 of article 4 of the Regulations on Costs in Tax Arbitration Proceedings, and communicate such payment to CAAD.

11. On 29 April 2019, the Claimant submitted a petition, in compliance with the principle of adversarial procedure, in response to the exceptions raised by the Respondent, to which, through a petition submitted on the same day, the latter invokes the inadmissibility of same.

12. The Claimant presented its written submissions, and the Respondent presented its submissions on 7 and 16 May 2019, respectively.

II. The Claimant Argues Its Petition, in Summary, as Follows:

The Claimant supports its petition for annulment of the assessments of Municipal Property Tax (IMI) for the years 2013, 2014, 2015 and 2016, in the total amount of €17,753.02 (seventeen thousand seven hundred and fifty-three euros and two cents) to which it was subject, regarding the urban property registered under article ... of the Union of parishes of ... (..., ..., ... and ...), and the petition for revocation of the decision dismissing the petition for review of such assessment acts, on the grounds that they suffer from error regarding the assumptions of law and fact, on the basis that it considers that "[g]iven the location and importance of the property in question, (...) it is the Claimant's understanding that IMI should not be charged, as this property is exempt from that tax, with such exemption applying automatically under article 44, section 1, paragraph n) of the Tax Benefits Code ("TBC"), approved by Decree-Law no. 215/89, of 1 July."

III. In Its Response the Respondent, in Summary, Invoked the Following:

1. The Respondent defends itself, in its response, by exception and by impugnation.

2. By exception, the Respondent invokes the incompetence of the Arbitral Tribunal ratione materiae, on one hand, as to the petition relating to Official Review of a tax act and, on the other, as to the petition for registration of IMI exemption.

3. By impugnation, the Respondent rebuts the Claimant's arguments, in particular as to the defect invoked, impugning by challenging the merits thereof, concluding to the effect that "(...) the tax acts in question are valid and legal because they conform to the legal regime in force at the date of the tax event, so that no error imputable to the services occurred in this case."

IV. Preliminary Matters

The Tribunal is competent and is regularly established, pursuant to paragraph a) of section 1 of article 2 and articles 5 and 6, all of the LFATM.

The parties have legal personality and capacity, show themselves to be legitimate, are regularly represented, and the proceedings do not suffer from nullities.

V. Facts Established

With relevance to the decision, the following facts are deemed established:

A. The Claimant is a Portuguese company which, in the years 2013, 2014, 2015 and 2016, was the owner of various properties located in Portuguese territory, among which, the urban property registered in the urban property register under article ... of the Union of parishes of ... (..., ..., ... and ...), arising from the urban property article registered under article ..., of the parish of ... – cfr. agreement of the parties and administrative file -;

B. The property, identified in A. above, is located in the urban agglomeration known as the "Historic Centre of ..." and is part of the UNESCO World Heritage List, by decision of the World Heritage Committee of 26 November 1986, as published in the Notice of the Cultural Services Directorate, published in the Official Gazette, II Series, of 17-02-1988 – cfr. agreement of the parties and administrative file -;

C. The Claimant was notified to proceed with payment of the IMI assessment acts for the years 2013, 2014, 2015 and 2016, in the total amount of €17,753.02 (seventeen thousand, seven hundred and fifty-three euros and two cents), as per the following table: - cfr. administrative file -

D. The Claimant proceeded with payment of the assessment acts underlying the arbitral petition – cfr. agreement of the parties - ;

E. The Claimant submitted four petitions for official review of the IMI assessments referred to above, aimed at partial annulment thereof, which were dismissed by order, of 14.09.2018, of the Deputy Chief of the Finance Services Office of ..., under delegation of powers - cfr. administrative file -;

VI. Facts Deemed Not Established

There are no facts deemed not established, because all facts relevant to the appreciation of the petition were deemed established.

VII. Reasoning on the Facts Deemed Established

For the conviction of the Arbitral Tribunal regarding the facts established, the documents attached to the proceedings, as well as the administrative file, were relevant, all analyzed and weighed in conjunction with the pleadings, from which agreement results regarding the factuality presented by the parties, pursuant to the provisions of section 7 of article 110 of the CPPT.

It should be noted that, regarding the facts, the Tribunal need not pronounce on everything alleged by the parties, falling to it only the duty to select the facts that matter for the decision, to distinguish the established matter from the unestablished [(cfr. article 123, section 2 of the CPPT and section 3 of article 607 of the Code of Civil Procedure, applicable by virtue of article 29, section 1, paragraphs a) and d) of the LFATM)].

Thus, the facts pertinent to the judgment of the case are selected based on their legal relevance which is established based on the various solutions of the question(s) of law to be determined. (cfr. article 596 of the CPC, applicable by virtue of article 29, section 1, paragraph e) of the LFATM).

VIII. Legal Grounds

By way of introduction, the present Tribunal considers it should, from the outset, state that it reserves, in accordance with the jurisprudence of the Supreme Administrative Court (STA) (See Judgment of the Plenary of the 2nd Section of the STA, of 07.06.1995, Appeal no. 5239) and articles 607, sections 2 and 3 of the Code of Civil Procedure (CPC) and article 123, first part, of the Code of Tax Procedure and Process (CTPP), applicable to tax arbitral proceedings by virtue of article 29 of the Legal Framework for Arbitration in Tax Matters (LFATM), the right to consider only the arguments formulated by the parties which it deems pertinent for the appreciation of the question at issue, which it will do after having identified the parties and the object of the dispute, having stated the questions to be decided, and, after having justified the decision discriminating the facts established and those not established, further, indicating, interpreting and applying the corresponding legal norms and, finally, presenting its final conclusion (decision).

Let us proceed,

I. PRELIMINARY MATTER - APPRECIATION OF THE EXCEPTIONS INVOKED

1. On the Incompetence of the Arbitral Tribunal Ratione Materiae (Dismissal of the Petition for Official Review of a Tax Act)

1. The Respondent, in its response, defends itself by exception, invoking, on one hand, the "incompetence of the Arbitral Tribunal to consider the dismissal of petitions for Official Review of a Tax Act," claiming for that purpose that "the consideration of such matter goes beyond the competencies reserved to it," inasmuch as "they were not preceded by administrative impugnation "in accordance with articles 131 to 133 of the Code of Tax Procedure and Process. As such, the assessments that are the subject of petitions for Official Review cannot be considered by the Arbitral Tribunal."

2. ...and, on the other hand, invokes the partial incompetence of the Arbitral Tribunal ratione materiae regarding the petition formulated by the Claimant to determine the "registration of the exemption provided for in paragraph n) of section 1 of article 44 of the Tax Benefits Code on the property above identified, in strict compliance with the provisions of article 78 of the General Tax Law, with retroactive effect to the year 2013," by understanding that "in light of that article [2, section 1 of the LFATM] it is clearly apparent that outside the jurisdiction of tax arbitration lies the consideration of any questions relating to the registration of facts pertaining to properties or to the registration of matricial information. As these are questions related to preparatory and instrumental acts of the stamp tax assessment act."

3. Notified to pronounce on the invoked exceptions, the Claimant defended the competence of the Arbitral Tribunal to consider the petition or its pretensions, manifesting the understanding that arbitral tribunals are competent as to the declaration of illegality of tax assessment acts, as they are to consider the "petition for return of the amount paid as IMI, relating to the urban property registered in the urban property register under article ... of the Union of parishes of ... (…) as well as the registration of the exemption provided for in article 44, section 1 paragraph n) of the Tax Benefits Code ("TBC"), approved by Decree-Law no. 215/89, of 1 July, regarding the property above identified, in strict compliance with the provisions of article 78 of the General Tax Law."

Let us see who is correct.

A. ON THE INCOMPETENCE OF THE ARBITRAL TRIBUNAL RATIONE MATERIAE (DISMISSAL OF THE PETITION FOR OFFICIAL REVIEW OF A TAX ACT)

1. In the present arbitral proceedings, we are faced with the petition for declaration of illegality of additional assessments of Municipal Property Tax (IMI), relating to the years 2013 to 2016, which were the subject of a petition for review of the tax act, and after its dismissal, impugned to the present arbitral tribunal.

2. Now, the Respondent imputes incompetence of the Arbitral Tribunal to consider the dismissal of petitions for Official Review of a Tax Act, based on the understanding that supports it to the effect that "the consideration of such matter goes beyond the competencies reserved by law."

3. In fact, the act in question in the present proceedings is an act of additional assessment of IMI, not being, therefore, any act of self-assessment, withholding at source or payment on account, so that, from the outset, it is not dependent on any prior administrative claim.

4. Self-assessment, withholding at source and payment on account require a prior administrative claim to ensure their contestability, pursuant to the provisions of articles 131 to 132 of the CTPP, being thus a second-level act in question. Nothing prevents such contestability from also being accepted when the second-level act in question is the dismissal of a timely petition for official review.

5. In fact, in this case the contested assessment has already been scrutinized for legality by the TCA, through the consideration of a petition for official review.

6. For the purposes of its contestability, this act is also considered an act that involves the consideration of the legality of the assessment act.

7. It is clarified, with evident interest, in the decision of the Collective Arbitral Tribunal, rendered in process no. 620/2017-T that:

"On the other hand, the formula 'declaration of illegality of acts of assessment of taxes, self-assessment, withholding at source and payment on account,' used in paragraph a) of section 1 of article 2 of the LFATM does not restrict, in a mere declarative interpretation, the scope of arbitral jurisdiction to cases in which an act of one of those types is directly contested. In fact, the illegality of assessment acts may be declared jurisdictionally as a corollary of the illegality of a second-level act, which confirms an assessment act, incorporating its illegality.

The inclusion in the competencies of the arbitral tribunals operating at CAAD of cases in which the declaration of illegality of the acts indicated therein is effected through the declaration of illegality of second-level acts, which are the immediate object of the contestatory pretension, results with certainty from the reference made in that norm to the acts of self-assessment, withholding at source and payment on account, which expressly refer to as included among the competencies of the arbitral tribunals. In fact, regarding these acts it is imposed, as a rule, the necessary administrative claim, in articles 131 to 133 of the CTPP, so that, in these cases, the immediate object of the contestatory proceedings is, as a rule, the second-level act which considers the legality of the assessment act, an act that, if it confirms it, must be annulled to obtain the declaration of illegality of the assessment act. The reference made in paragraph a) of section 1 of article 10 of the LFATM to section 2 of article 102 of the CTPP, which provides for the contestation of acts of dismissal of administrative claims, dispels any doubts that second-level acts that assess the legality of the acts referred to in paragraph a) of that article 2 of the LFATM are covered by the competencies of the arbitral tribunals operating at CAAD."

1. As is clear from the GUIDE TO TAX ARBITRATION – Revised and Updated – coordination Nuno de Villa-Lobos, 3rd Edition, Almedina, p. 104 et seq. – "4.3.2. Declaration of illegality of assessment acts in respect of which administrative claims, hierarchical appeals and petitions for review of the tax act were filed":

"Assessment acts of taxes are acts of the Tax Administration that assess and conform the tax legal relationship.

The same applies to self-assessment, withholding at source and payment on account acts, although therein the application of a rate to the taxable matter is effected by the taxpayer or a substitute.

Tax laws provide the possibility for the taxpayer to administratively contest assessment acts (in the broad sense, encompassing those of self-assessment, withholding at source and payment on account), through administrative claim (...) and to contest the decisions dismissing administrative claims through hierarchical appeal (...). The acts that decide administrative claims and hierarchical appeals of decisions on administrative claims will be, in this context, second and third level acts, respectively, in which the legality of assessment acts, which are first-level acts, may be considered. The same may be said regarding acts that proceeded with the review of assessment acts of taxes, within the scope of article 78 of the General Tax Law."

1. Continuing the aforesaid Guide, clarifying that:

"The express tenor of the LFATM does not result in the possibility of considering by the arbitral tribunals operating at CAAD acts of dismissal of petitions for review of tax acts. In fact, article 2 of the LFATM makes no express reference to these acts, contrary to what occurs with the legislative authorization on which the Government based itself to approve the LFATM, which refers to 'petitions for review of tax acts' and 'administrative acts that involve the consideration of the legality of assessment acts'.

However, the formula 'declaration of illegality of assessment acts of taxes, self-assessment, withholding at source and payment on account,' used in paragraph a) of section 1 of article 2 of the LFATM, in a mere declarative interpretation, does not restrict the scope of arbitral jurisdiction to cases in which an act of one of those types is directly contested, as the illegality of illegality acts may be declared jurisdictionally as a corollary of the illegality of a second act level, which conforme an assessment act, incorporating with that confirmation its illegality.

Moreover, it is unequivocal, by what was said regarding the decisions dismissing administrative claims and hierarchical appeals, that cases are included in the competencies of the arbitral tribunals operating at CAAD in which the declaration of illegality of the acts indicated therein is effected through the declaration of illegality of second level or third level acts, which are the immediate object of the contestatory pretension. The possibility of considering the legality of primary acts through the consideration of the legality of second level or third level acts is evident in the reference made in article 2 of the LFATM to self-assessment, withholding at source and payment on account acts, as, regarding these acts it is important, it is imposed, as a rule, the necessary claim, in articles 131 to 133 of the CTPP, so that, in these cases, the mediate object of the contestatory proceedings is, as a rule, the second level act that considers the legality of the assessment act. An act that, if it confirms it, must be annulled to obtain the declaration of illegality of the assessment act.

It was even in this sense that the Tax Administration, through Regulation no. 112-A/2011, of 22 March, interpreted these competencies of the arbitral tribunals operating at CAAD, in excluding from the scope of these competencies "pretensions relating to the declaration of illegality of self-assessment, withholding at source and payment acts that have not been preceded by resort to the administrative channel in accordance with articles 131 to 133 of the Code of Tax Procedure and Process," which has the effect of restricting its binding to cases in which such resort to the administrative channel was used.

Having obtained the conclusion that the formula used in paragraph a) of section 1 of article 2 of the LFATM does not exclude cases in which the declaration of illegality results from the illegality of a second level act, it will also cover cases in which the second level act is that of dismissal of a petition for review of the tax act, as there is no reason seen for restricting, particularly as, in cases in which the petition for review is submitted within the period of administrative claim, it should be equated to an administrative claim. The same applies to the decision of the hierarchical appeal, expressly indicated in paragraph a) in section 1 of article 10 of the LFATM as the starting term of the period for filing a petition for establishment of the Arbitral Tribunal."

1. Therefore, the Respondent lacks reason as to this invoked exception.

2. In light of the foregoing, the present tribunal considers that the exception of material incompetence of the Arbitral Tribunal ratione materiae raised by the Respondent regarding the petition for official review of a tax act should not be upheld.

B. ON THE PARTIAL INCOMPETENCE OF THE ARBITRAL TRIBUNAL RATIONE MATERIAE REGARDING THE PETITION FOR REGISTRATION OF IMI EXEMPTION

1. The Claimant in the petition for establishment of the Arbitral Tribunal which constitutes the present proceedings seeks ultimately that:

"In these terms and in the other applicable laws, always with the learned supplementation of Your Excellency respectfully requests, be pleased to grant the petition for arbitral pronouncement, for breach of law, determining in consequence:

a) The annulment of the decisions dismissing the petition for official review of the IMI assessment acts, for the years 2013 to 2016, regarding the urban property registered in the urban property register under article ... of the Union of parishes of ... (..., ..., ... and ...), which arises from the urban property article registered under article ... of the parish of ..., which is located in the Historic Centre of ... classified as UNESCO World Heritage, as well as the partial annulment of the respective IMI assessments;

b) That the exemption from IMI be declared under para. n) of section 1 of art. 44 of the Tax Benefits Code ("TBC") relating to urban property registered in the urban property register under article ... of the Union of parishes of ... (..., ..., ... and...), which arises from the urban property article registered under article ... of the parish of ..., which is located in the Historic Centre of ... classified as UNESCO World Heritage;

c) The registration of the exemption provided for in para. n) of art. 44 of the Tax Benefits Code ("TBC") on the property above identified, in strict compliance with the provisions of article 78 of the General Tax Law, with retroactive effect to the year 2013;

d) That the Tax Authority be condemned to reimburse to the Claimant the sum of €17,753.02 (seventeen thousand, seven hundred and fifty-three euros and two cents), relating to the payment of IMI for the years 2013 to 2016;

e) That the Tax Authority be condemned to the payment of compensatory interest in accordance with the terms provided for in art. 43 of the General Tax Law and 61 of the CTPP."

1. Now, the Respondent invokes the exception of incompetence of the arbitral tribunal in considering the petition respecting the registration of IMI exemption on the property in question in the present proceedings, it should be said, from now on, that it is entirely correct.

2. Thus, and in light of the manifest incompetence of the present Arbitral Tribunal to consider such petition - the registration of IMI exemption -, in view of the provisions of article 2 of the Legal Framework for Arbitration in Tax Matters (LFATM) and article 2 of Regulation no. 112-A/2011, of 22 March, on this question the Tribunal need not make any additional considerations.

3. It shall, however, consider and weigh all the other petitions formulated by the Claimant in the present proceedings, which fall within its competence, in particular, ratione materiae. Let us then consider.

II. QUESTION TO BE DECIDED

1. In light of the foregoing in the preceding numbers, there are two contested questions in the present proceedings, namely:

a) to determine whether the tax acts of assessment of Municipal Property Tax (IMI), relating to the years 2013, 2014, 2015 and 2016 are illegal, insofar as the urban property registered in the urban property register under article ... of the Union of parishes of ... (..., ..., ... and ...), arising from the urban property article registered under article ..., of the parish of ..., is classified as a National Monument as a result of the same being included in the ensemble commonly referred to as the Historic Centre of ..., considered World Heritage by UNESCO in 1996, and if, for that reason, such property meets the requirements established by law to enjoy the IMI exemption enshrined in article 44, section 1, paragraph n) of the TBC;

b) to determine whether the interpretation conveyed by the Claimant, incident on the IMI assessments reviewed violates the principles of tax equality, fiscal justice, contributive capacity, local autonomy and tax equality in the decision, while suffering from organic unconstitutionality.

IX. Legal Grounds

A. ON THE CLASSIFICATION OF PROPERTIES

1. Let us now determine the Law applicable to the facts underlying the issues stated above.

Now,

1. Article 44, section 1 paragraph n) of the TBC establishes that exempt from IMI are "properties classified as national monuments and properties individually classified as of public interest or municipal interest, in accordance with applicable legislation."

2. This article is composed of two provisions. First, properties classified as national monuments are exempt from IMI. Second, properties individually classified as of public interest or municipal interest are exempt from the same tax.

3. Bearing in mind the reference to applicable legislation contained in the aforementioned norm of article 44, section 1, paragraph n) of the TBC, it is necessary to take into account Law 107/2001, of 8 September – Law of Bases of Cultural Heritage –, more specifically, its article 15, according to which:

"1 - Immovable assets may belong to the categories of monument, ensemble or site, in the terms in which such categories are defined in international law, and movable assets, among others, to the categories indicated in title VII.

2 - Movable and immovable assets may be classified as of national interest, of public interest or of municipal interest.

3 - For immovable assets classified as of national interest, whether they are monuments, ensembles or sites, the designation 'national monument' shall be adopted and for movable assets classified as of national interest the designation 'national treasure' is created.

4 - A property is considered of national interest when its respective protection and enhancement, in whole or in part, represents a cultural value of significance for the Nation.

(...)

7 - Cultural immovable assets included in the world heritage list form, for all purposes and in their respective category, the list of assets classified as of national interest."

1. In turn, the Convention for the Protection of World Cultural and Natural Heritage, which took place in Paris, and was approved by Decree no. 49/79, of 6 June, sought to establish which natural and cultural assets could be inscribed on the World Heritage List, establishing the duties of Member States as to the identification and protection of such assets. In this sequence, various monuments, sites or ensembles came to obtain the classification of UNESCO World Heritage. In particular, classified ensembles stand out, more specifically, Historic Centres classified as UNESCO World Heritage, such as the Historic Centre of....

2. It should be noted that the aforementioned ensembles classified as World Heritage benefited, for several years, from IMI exemption, under the combined provisions of articles 44, section 1, paragraph n) of the Tax Benefits Code and article 15, sections 2, 3 and 7 of Law no. 107/2001, of 8 September (Law of Bases for Protection of Cultural Heritage).

3. As already mentioned, articulating the aforementioned precepts, immovable properties located in Historic Centres included in the UNESCO World Heritage List are classified as being of national interest, falling within the category of "National Monuments" and, consequently, benefiting from the exemption enshrined in paragraph n) of section 1 of article 44 of the TBC.

4. This formulation came to be reiterated in Decree-Law no. 309/2009, of 23 October – Immovable Cultural Heritage –, which establishes the procedure for classification of immovable assets of cultural interest, as well as the regime of protection zones and the detailed safeguarding plan. In accordance with its article 3, section 1 "an immovable asset may be qualified as of national interest, of public interest or of municipal interest," adding in section 3 that "the designation 'national monument' is attributed to immovable assets classified as of national interest, whether they are monuments, ensembles or sites."

5. The fact that individually classified properties may coexist, in case of delimitation of an ensemble or a site, in accordance with article 56 of Decree-Law no. 309/2009 only has provisional relevance for delimiting the protection zone of that property until the publication of the classification of the ensemble or site.

6. For that reason it is understood that article 44 of the TBC distinguishes between "property classified as a national monument" and "property individually classified as of public or municipal interest," only requiring individualization in relation to these latter two categories, and not as to those of national interest.

7. As to the argument that some authors defend a restrictive interpretation of exemptions to classified immovable properties, with the aim of excluding from the benefits attributed under IMI or IMT all situations in which no procedure or act of individual classification as national monument, immovable of public or municipal interest has occurred, reason for which article 6, paragraph g) of the IMT Code was amended in that sense by Law 55-A/2010, of 31 December, leading to the exemption no longer covering "acquisitions of properties classified as of national interest, of public interest or of municipal interest, under Law no. 107/2001, of 8 September" to pass to contemplating only "acquisitions of individually classified properties as of national interest, of public interest or of municipal interest, in accordance with applicable legislation," we understand that this argument does not prevail either.

8. Moreover, it would hardly make much sense, as the wording of article 44 of the TBC was not amended in the same sense, continuing to require individual classification for attribution of the exemption only in the case of properties of public or municipal interest, but making no such requirement for national monuments. On the contrary, the provision of section 5 of article 44 of the TBC provides that "the exemption referred to in paragraph n) of section 1 is of an automatic character, operating through communication of the classification as national monuments or of individual classification as immovable of public or municipal interest (...)."

9. Thus, truly, we consider it clear that the legislator's intention was to dispense with individual classification for purposes of IMI exemption for national monuments, only requiring it in relation to immovable of public or municipal interest.

10. The property in question in the present proceedings – cfr. agreement of parties - is part of the Historic Centre of ..., which was inscribed on the UNESCO World Heritage List, as declared by the Notice, published in the Official Gazette, I Series no. ..., of 17 February 1988.

11. And, it is recognized, by Portuguese legislation, in light of the provisions of article 15, no. 7 of the LBCH, of 08 September 2001 as a "National Monument"

12. In this sense, among others, the decisions of CAAD in process no. 325/2014-T, 76/2015-T, 33/2016-T, 98/2016-T, 379/2016-T, 534/2016-T and 204/2017-T have already pronounced, which we accompany.

13. In fact and with relevance, it is important to note that this has also been the position of the Central Administrative Courts (North and South), with, in particular, by applicable to the case at issue, we bring to the discussion what is stated in the Judgments of the TCA North, rendered in processes no. 0063/14.1BEPRT, of 01.06.2017 and no. 00134/14.42BEPRT, of 07.12.2016, the summary of this latter referring:

"1 - The following are exempt from municipal property tax: properties classified as national monuments and properties individually classified as of public interest or municipal interest, in accordance with applicable legislation – cfr. article 44, section 1, paragraph n) of the Tax Benefits Code.

2 - Immovable assets located in Historic Centres included in the UNESCO World Heritage List are classified as being of national interest, falling within the category of 'national monuments' – cfr. article 15, sections 3 and 7 of Law no. 107/2001, of 8 September.

3 - Properties inserted in Classified Historic Centres benefit from exemption from municipal property tax."

1. Thus, and as concluded by the decision of CAAD in process no. 76/2015-T, as well as in the Judgments of the TCA, above identified, being a property located in the Historic Centre of a city, legally qualified as a national monument, it is manifest that it benefits from the said exemption, being thus illegal the IMI assessment here contested, and the tax that was paid must be reimbursed to the Claimant.

2. And more recently, see the summary of the Judgment of the Supreme Administrative Court rendered within the scope of process no. 0134/14.4BEPRT, of 12.12.2018 in which the position is confirmed that: "[p]roperties designated as national monuments are exempt from municipal property tax in accordance with the provisions of article 44, section 1, paragraph n) of the Tax Benefits Code."

B. ON THE ALLEGED UNCONSTITUTIONALITY OF THE INTERPRETATION CONVEYED BY THE CLAIMANT

1. The Respondent invokes in its response a defect of unconstitutionality because the "interpretation conveyed by the Claimant is shown to be contrary to the Constitution of the Portuguese Republic ("CPR"), insofar as it violates the constitutional principles: (i) of tax equality; (ii) of fiscal justice, (iii) of contributive capacity, (iv) of local autonomy and (v) of participation in the decision."

Now, let us see,

1. Regarding the alleged violation of the principle of tax equality, the Respondent manifests the understanding that "the interpretation proposed by the Claimant is an interpretation that offends the basic principle of tax equality (article 13 of the CPR), insofar as, while owner of a property integrated into the so-called Historic Centre of ..., devoid of individual cultural value (since there is no individual classification diploma of that property) (…) the Claimant seeks to be privileged, without justifiable reason, relative to the remaining owners of unclassified immovable properties. (…) In the case sub judice, the Respondent raises the violation of the principle of equality before tax law, in the dimension of the obligation of differentiation, in the interpretation given by the claimant." (articles 268 to 279 of the learned response).

2. As the Respondent rightly states, in its learned response, "the principle of equality is one of the basic principles of the Portuguese constitutional system, finding general enshrinement in article 13 of the CPR." (article 272 of the learned response).

3. In fact, article 13 of the CPR provides that "all citizens have the same social dignity and are equal before the law," which means that this principle determines that what is equal be treated equally and what is different be treated differently, to the extent of the difference.

4. It happens that, in the case at hand we are dealing with a property that is located in the Historic Centre of ..., which is included in the UNESCO World Heritage List, a fact that, by itself, gives the same high cultural value (anticipating already the response to what will follow below regarding the alleged violation of the principle of contributive capacity.) – something that does not occur to properties that are not in the same conditions.

5. Now, pursuant to article 15, section 7 of the LBCH, immovable cultural assets included in the world heritage list are part, for all purposes and in their respective category, the list of assets classified as of national interest.

6. Moreover, and notwithstanding, the property being inserted in an ensemble, the fact is that for immovable assets classified as of national interest, whether they are monuments, ensembles or sites, they are all considered "national monument."

7. Accordingly, the equal treatment of the owner of the property in question will tend to be assessed in relation to the owners of all other properties inserted in the Historic Centre of ..., and not as the Respondent seeks in relation to properties not inserted in that Historic Centre or which are not classified as "national monuments," so that, being the arguments raised by the Respondent devoid of substance, the alleged unconstitutionality necessarily does not prevail, by violation of the principle of tax equality.

8. Regarding the defended violation of the principle of contributive capacity, the Respondent states that "while owner of properties devoid of individual cultural value (since there is no individual classification diploma of those properties) (…), seeks to enjoy a tax exemption intended to benefit owners of properties that effectively have cultural value and that are subject to financial burdens and more onerous bureaucratic procedures than owners of recently built properties" (article 280 of the learned Response);

9. ...adding, in agreement, as a ground for the violation of the principle of justice in the distribution of the tax burden, that "seeking to enjoy an exemption relating to an urban property devoid of individual cultural value and only because it is found within the urban meshes of the so-called Historic Centre of ..." subverts such principle.

10. Now, the Respondent's argument in relation to this defect hinges essentially on the question of the cultural value of the property in question.

11. As already mentioned above, the fact alone that the property in question is located in the Historic Centre of ... and consequently in the UNESCO World Heritage List leads to stating with certainty that it has high cultural value.

12. On this matter, we can consult the Judgment of the North Central Administrative Court rendered in process no. 01480/14.2BEPRT, of 04.05.2017 which the present Arbitral Tribunal accompanies and on which it relies, and which clarifies the following:

"The principle of equality before public charges results from the need to impose patrimonial sacrifices, which concern all, should be affected, equally, the spheres of the generality of citizens, with identical contributive capacity. That is, this principle requires that the sacrifices inherent in the satisfaction of public needs are equitably distributed among all citizens; all citizens should contribute equally to the public charges according to their contributive capacity. In fact, it is not proven that, in concrete, the Respondent, as owner of the property, is not subject to special rules and impositions for the same being inserted in the Historic Centre of Porto, in particular, that it does not bear expenses related to the conservation and restoration of that asset, which cannot but be termed cultural, insofar as it is integrated in the aforesaid ensemble. We find pertinent the counter-alleged by the Respondent in this respect: '(…) bearing in mind in concrete the tax benefit now in question, the same carries limiting counterparts that curtail the autonomy of the owners of the said properties, who find themselves limited in their action as owners, in particular with regard to the execution of works on the properties in question. Which becomes understandable because world heritage is involved. (…)' We reiterate, therefore, that it is clear that the property of the Respondent is in equal circumstances in relation to all other properties inserted in the Historic Centre of Porto. Thus, all owners of properties therein integrated will benefit, equally, from the tax benefit in question, no disrespect being visible of the principle of contributive capacity, given that it was not demonstrated that the Respondent, in concrete, is not subject to financial burdens and more onerous bureaucratic procedures than other owners of properties not inserted in the ensemble. On the other hand, it also was not established that the faculties of disposition, transformation and enjoyment of the Respondent, in concrete as regards its property inserted in the classified ensemble, are different from those permitted to the holder of an individually classified property; so it proves impossible to assess the alleged subversion of the principle of justice in the distribution of the tax burden."

1. Now, taking advantage of the reasoning of the aforesaid judgment with the appropriate adaptation to the concrete case, and noting, on one hand, that the property in question has high cultural value because it is located in the Historic Centre of ..., as already mentioned;

2. ...on the other, that it is not proven, in the present proceedings, that the Claimant is not subject to financial burdens and more onerous bureaucratic procedures than other owners of properties not inserted in the ensemble, and,

3. ...finally, that it is likewise not established that the faculties of disposition, transformation and enjoyment of the Claimant, in concrete as regards its property inserted in the classified ensemble, are different from those permitted to the holder of an individually classified property,

4. ...the present Arbitral Tribunal considers that, in the concrete case, the assessment of the alleged subversion of the principle of fair distribution of the tax burden, in the terms advanced by the Respondent, proves impossible, with the alleged defect of violation of the principle of contributive capacity not prevailing for the reasons stated.

5. Regarding the alleged defect of the principle of local autonomy, the Respondent invokes that "the understanding conveyed by the Claimant, according to which the urban property sub judice integrates the 'UNESCO World Heritage List' as 'Historic Centre of ...' and that, as such it is classified, then it must be concluded that the Municipality of ... sees its local autonomy (articles 235 and 238 of the CPR) harmed insofar as it had no say in the question of the loss of IMI revenue underlying the area of the Historic Centre of ...."

6. Continuing "[i]n other words, the local autonomy of the Municipality of ... and, therefore, part of its local revenue was at once, decided indirectly by an organism (read UNESCO World Heritage Committee) which is not part of the bodies of the Portuguese State; it does not have any legal competency in tax matters in Portuguese territory; it was not delegated any legal competency in tax matters by the Portuguese State within the scope of the candidacy for the 'UNESCO World Heritage List'; it was not delegated any legal competency in tax matters by the Municipality of ... within the scope of the candidacy for the 'UNESCO World Heritage List'."

7. Furthermore, the Respondent states, as to that matter that "[s]ince the Municipality of ... had no say in the question of the loss of IMI revenue underlying the area of the Historic Centre of ... (…) it must be concluded that, by way of article 15/7 of the LBCH, the constitutional principle of participation (article 268/3 of the CPR) was disrespected, in this case in the sphere of the Porto municipality, in the formation of the decision of classification."

8. Now, as to this invoked defect, the present Arbitral Tribunal considers that it is completely devoid of substance, given that the Respondent is not the Municipality of ... – an entity that may be prejudiced by the said exemption.

9. In fact, the Respondent's argument follows the path of defense of a third party when it itself abstained from defending itself.

10. In fact, the present Arbitral Tribunal takes advantage of what is sustained in the Judgment indicated in 32 above, as to this alleged defect, to the effect that: "(...) as the law indicates (article 44, section 5 of the TBC, in the wording conferred by Law no. 3-B/2010, of 28/04, referred to above), the recognition of the exemption in question is automatic and its communication is the responsibility of the territorially competent Municipal Councils, being that attached to the proceedings there is a municipal office communication in which the Municipal Council of ... states that the property owned by the Respondent here is exempt from IMI. One cannot, either, say that the Municipality of ... had no say in the question of the loss of IMI revenue, when there is abundance of documents attached to the proceedings on this matter – cfr. pgs. 39 to 60 of the physical file.

In this conformity, once again, the proofs fail as to the requirements of fact, given that the elements of the proceedings show, rather, participation, knowledge and 'recognition' by the Porto municipal authority of the exemption from Municipal Property Tax as to the concrete situation; nor is it visible also that the interpretation effected by the Respondent and by the Court 'a quo' suffer from the invoked unconstitutionality." to rule the defect of violation of the principle of local autonomy invoked by the Respondent as not prevailing.

1. Finally, the Respondent invokes Organic Unconstitutionality, insofar as the Claimant ended up making an equivalence or equating between the classifications provided for in the legislation of the Estado Novo and those provided for in the LBCH, that is, through the equivalence between the classification National Monument (provided for in Decree 20.3985 of 1932) and the classification of National Interest (provided for in article 15/2 of the LBCH), when such equivalence or equating will necessarily have to result from the law of Parliament or authorized government decree-law.

2. Further stating that "[a]lthough the LBCH permits that development legislation may come to enshrine the necessary rules for effecting, among others, the conversion of classifications (article 112/3 of that diploma), the fact is that the development decree-laws published to date do not provide any mechanism related to it (…) and as a direct result of this omission by the cultural legislator, the fiscal legislator of 2008 could not substitute itself for that one by making equivalent in article 44/1-n) of the TBC the classification of National Interest introduced by the LBCH to the classification of National Monument provided for in Decree 20.985 of 1932; And the fiscal legislator of 2008 being unable to substitute itself for the cultural legislator, naturally neither can the interpreter of the Law and the judge ever do so, on pain of obvious unconstitutionality, by violation of the reserve of law."

3. Now, without prejudice to the matter of unconstitutionality of the law being a matter of official knowledge, the truth is that the Tribunal must circumscribe itself to the concrete review of constitutionality, as the abstract review is within the exclusive competency of the Constitutional Court, as results from article 281 of the CPR.

4. Not being, in this way, prevented the raising of unconstitutionality of the norms that define the elements of taxation or exemption.

5. In fact, the official knowledge of unconstitutionality of the norms results equally from the emanation of the principle of the shaping value of constitutional precepts, which must prevail over other legal norms, when they show themselves incompatible therewith in the context of concrete review of the constitutionality of legal norms, assessing, by impugnation of the facts or officially, the existence of unconstitutionality of the applicable norms to the concrete case submitted to judgment – cfr. Judgment of the TCA South, of 21/09/2010, rendered within the scope of process no. 03872/10.

6. Moreover, it is necessary to take into account that what may and should be subject to concrete review of constitutionality, by the Courts, are norms and not any decisions, whether they are of a judicial or administrative nature, nor, in any case, any possible interpretations that may be made of such norms by those decisions.

7. Now, paragraph a) of section 1 of article 44 of the TBC expressly mentions that properties classified as national monuments are exempt from IMI – a provision established by the interpreter of the law and/or judge.

8. And article 15 of Law no. 107/2001, of 8 September and article 3 of Decree-Law no. 309/2009, of 23 October provide that an asset classified as of national interest is designated as a "national monument."

9. In this sequence and recovering the exalted argument set forth in the Judgment of the TCA North, indicated in 32 above, which the present Arbitral Tribunal accompanies and adheres to:

"Thus, we understand that the parallelism is effected by the law itself in force, with neither the Respondent, nor the court, having effected any interpretation consubstantiated in an equivalence or equating between the classifications provided for in the legislation of the Estado Novo and those provided for in the Law of Bases of Cultural Heritage (LBCH), that is, in an equivalence between the classification of National Monument (provided for in Decree 20.3985 of 1932) and the classification of National Interest (provided for in article 15/2 of the LBCH). The Law of Bases of Cultural Heritage (Law no. 107/2001, of 8 September) establishes the bases of the policy and the regime of protection and enhancement of cultural heritage and was drawn up by the Assembly of the Republic, under article 161, paragraph c) of the Constitution of the Portuguese Republic, to serve as the general law of the Republic. In this conformity, the equivalence or equating that is effected in article 15, section 3 of this Law does not suffer from an organic unconstitutionality, insofar as it results from a law of Parliament. It was Parliament itself that, in article 15, section 3 of the LBCH expressly established that an asset classified as of national interest is a national monument."

1. Continues that judgment, with evident relevance that "[i]n the development of the legal regime established by Law no. 107/2001, of 8 September, and under articles a) and c) of section 1 of article 198 of the Constitution of the Portuguese Republic, the Government decreed, through Decree-Law no. 309/2009, of 23 October, that the designation of 'national monument' is attributed to immovable assets classified as of national interest, whether they are monuments, ensembles or sites – cfr. article 3, section 3." to conclude that: "[t]hus, an immovable asset classified as of national interest – cfr. article 3, section 1 of Decree-Law no. 309/2009, of 23 October – is a national monument, as it is so designated by law – cfr. article 3, section 3 of this Decree-Law and article 15, section 3 of the LBCH, no invoked organic unconstitutionality being visible."

2. Thus considering that the jurisprudential exposition above transcribed is applicable in its entirety to the case brought to the consideration of the present Arbitral Tribunal, and that this accompanies all the argument sustained therein, it considers that the alleged defect of organic unconstitutionality should not prevail.

3. In light of the foregoing, the present Arbitral Tribunal decides that all the defects and matters of unconstitutionality alleged by the Respondent do not prevail, for lack of substantiation.

C. ON COMPENSATORY INTEREST

1. The Claimant further petitions that the right to compensatory interest be recognized, on the ground of error imputable to the services.

2. Section 1 of article 43 of the General Tax Law and article 61 of the Code of Tax Procedure and Process provide that compensatory interest is owed when it is determined in administrative claim or judicial impugnation, that there was error imputable to the services from which results the payment of a tax debt in an amount superior to that legally owed.

3. Error imputable to the administration is considered to occur when the error is not imputable to the taxpayer and is based on erroneous assumptions of fact that are not the responsibility of the taxpayer.

4. Now, resulting from the contested tax acts the obligation to pay tax in an amount superior to what would be due, compensatory interest is owed pursuant to the legally provided terms, the legislator presuming, in these cases, in which the annulment of the assessment is verified, that there occurred in the sphere of the taxpayer a prejudice by virtue of having been deprived of the patrimonial amount that had to be delivered to the State by virtue of an illegal assessment. In consequence, the taxpayer has the right to such indemnification, independent of any allegation or proof of the prejudice suffered.

5. In the present case, it will be unquestionable that, following the establishment of the illegality of the contested assessment act, there will be place for reimbursement of the tax by force of the provisions of section 1 of article 43 of the General Tax Law, and of article 100 of the General Tax Law, passing necessarily through there the restoration of the "situation that would exist if the tax act object of the arbitral decision had not been performed."

6. Similarly, it is understood that it will be free of doubt that the illegality of the act is imputable to the Tax Authority, which autonomously performed it in an illegal manner.

7. As to the concept of "error," it has been understood that only in cases of annulments founded on defects respecting the tax legal relationship will there be place for payment of compensatory interest, such right not being recognized in the case of annulments by procedural or formal defects.

8. Thus being, in the presence of a defect of violation of substantive law, which is embodied in error in the assumptions of law, imputable to the Tax Authority, the Claimant has the right to compensatory interest, in accordance with articles 43, section 1 of the General Tax Law, and 61 of the CTPP, counted from the payment of the tax until the complete reimbursement of the said amount.

X. DECISION

In harmony with the foregoing, it is decided:

A. To rule not prevailing the exception invoked by the Respondent of incompetence of the Arbitral Tribunal ratione materiae to impugn the dismissal of the petition for official review of a tax act;

B. To rule prevailing the exception invoked by the Respondent of incompetence of the Arbitral Tribunal ratione materiae regarding the petition for registration of IMI exemption, whereby the Tribunal shall not consider such question;

C. To rule prevailing the petition formulated by the Claimant in the present Tax Arbitral proceedings, as to the illegality of the IMI assessment acts relating to the years 2013, 2014, 2015 and 2016, in the total amount of €17,753.02 (seventeen thousand, seven hundred and fifty-three euros and two cents) to which it was subject, regarding the property registered under article ... of the Union of parishes of ... (..., ..., ... and ...), arising from the urban property article ... of the parish of ..., and consequently, to annul the tax assessment here reviewed;

D. To revoke the decisions rendered by the Tax and Customs Authority within the scope of the official reviews whose object are the assessment acts here reviewed.

E. To rule prevailing the petition for condemnation of the Tax and Customs Authority to reimburse the Claimant the value of the tax paid, plus compensatory interest pursuant to the legal terms, from the date on which such payment was made until the date of complete reimbursement thereof.

F. To rule not prevailing all the defects of unconstitutionality invoked by the Respondent, for lack of substantiation.

XI. VALUE OF THE PROCEEDINGS

The value of the proceedings is fixed at €17,753.02 (seventeen thousand, seven hundred and fifty-three euros and two cents), in accordance with article 97-A, section 1, a), of the Code of Tax Procedure and Process, applicable by force of paragraphs a) and b) of section 1 of article 29 of the LFATM and of section 2 of article 3 of the Regulations on Costs in Tax Arbitration Proceedings.

The amount of the costs is fixed at €1,224.00, in accordance with Table I of the Regulations on Costs in Tax Arbitration Proceedings, to be paid by the Tax and Customs Authority, once the petition was entirely successful, in accordance with articles 12, section 2, and 22, section 4, both of the LFATM, and article 4, section 4, of the cited Regulation.

Let it be notified.

Lisbon, 31 July 2019

The Arbitrator

(Jorge Carita)