IMT Tax Exemption for Tourism Enterprises Under Decree-Law 423/83: CAAD Arbitration Case 648/2014-T

ARBITRAL DECISION

Following the learned Decision delivered by the Central Administrative Court South, on 27 April 2017, which has become final, declaring the annulment of the decision delivered in the present case on 2 April 2015, a new arbitral decision is required.

ARBITRAL DECISION

IMT - Tourism Utility Tax Benefits

I - REPORT

1. On 1 September 2014, A…, with Tax Identification Number…, hereinafter referred to as the Claimant, resident in …, …, …, …, Hong Kong, submitted to the Administrative Arbitration Centre (CAAD) a request for constitution of a single arbitral tribunal, pursuant to the provisions of articles 10(1)(a) and 2(1)(a) of Decree-Law No. 10/2011 of 20 January (hereinafter referred to as RJAT), with a view to declaring the illegality of the IMT Payment Order in the amount of €27,000.53 (twenty-seven thousand and six euros and fifty-three cents), contained in Official Notice No…, of 28 November 2013, from the Tax Service of... … (…), and of the decision rendered on the Gracious Appeal, identified with No. …2014…, relating to the aforementioned Payment Order.

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

3. Pursuant to article 6(1) of RJAT, by decision of the President of the Deontological Board, Maria Manuela do Nascimento Roseiro, the undersigned, was appointed as sole arbitrator, who accepted the appointment within the legally prescribed period.

4. The parties having been notified and there being no refusal of the said appointment (articles 11(a) and (b) of RJAT and articles 6 and 7 of the Deontological Code), the arbitral tribunal was constituted on 13 November 2014, in accordance with the provisions of article 11(1)(c) of Decree-Law No. 10/2011 of 20 January, as amended by article 228 of Law No. 66-B/2012 of 31 December.

5. On 11 December 2014, the Tax and Customs Authority (AT or Respondent) submitted a Response and attached the administrative file, requesting exemption from the meeting provided for in article 18 of RJAT as well as from the presentation of submissions.

6. The Claimant agreed to the exemption from the meeting but not to the presentation of submissions, whereupon an arbitral order was issued for the respective presentation within a period of 15 days, running successively, and 28 March 2015 was set for the rendering of the arbitral decision.

7. After the presentation of submissions, the Claimant requested the attachment of a Court of Appeal Decision, which was accepted, changing the date of the decision to 2 April 2015; the Respondent was notified for possible submissions and responded on 31 March 2015.

8. Request for Arbitral Decision

The Claimant submits, in summary (at our responsibility), that:

• On 19 June 2006, it acquired from company B…, S.A., the autonomous fraction designated by the letters "BY", corresponding to real property fraction No…, on the floor…, Building…, identified as F, eleven, of the urban property situated in …, parish of …, municipality of ..., which forms part of the Tourist Complex "C…", to which was granted a Tourism Use License No. …/05, issued by the Municipal Chamber of ..., on 30 September 2005.

• The Tourist Complex "C…" comprises seven blocks and 95 tourist apartments constituted as autonomous fractions, corresponding to a tourist enterprise in plural ownership, pursuant to article 52 of Decree-Law No. 39/2008 of 7 March, a situation already foreseen in the previous legal regime contained in Decree-Law No. 167/97 of 4 July.

• At the time of execution of the deed of sale and purchase, there were presented the dispatch of the Secretary of State for Tourism of 2 June 2005 attributing tourism utility status by way of prior approval to the tourist enterprise and the tourism use license No. …/05 of 30 September 2005, issued by the Municipal Chamber of ..., relating to the property in its entirety, the Notary having inserted the following text: "This transfer is exempt from the payment of the Municipal Tax on Onerous Real Estate Transfers, pursuant to the provisions of article 20 of Decree-Law No. 423/83 of 5 December".

• By dispatch of the Secretary of State for Tourism of 23 May 2007, "the tourism utility, previously attributed to the Tourist Complex C…", was confirmed, pursuant to Decree-Law No. 38/94 of 8 February and Decree-Law No. 423/83 of 5 December, valid for a period of seven years, counted from the date of issue of the tourism use license by the Municipal Chamber of ... on 30 September 2005.

• On 4 December 2013, the Author was notified by official notice from the Chief of the Tax Service of... … (…), to "request payment guides at that tax service for payment of the amount of €27,006.53 of IMT, due to the fact that it had acquired fraction BY of the urban property…, of the parish of…, on 2006-06-19, with the benefit of tourism utility improperly recognized, according to the report prepared by the Tax Inspection Service of the Finance Office of Faro".

• On 2 April 2014, it submitted a Gracious Appeal of the levy invoking expiration of the right to revise the tax act recognizing exemption and the right to effect additional levy pursuant to article 31(3) of the IMT Code and illegality of the notice and tax procedure due to violation of the duty to provide grounds as required by articles 123(1), 124(1)(c) and 125 of the Administrative Code, as well as error of law regarding the non-verification of the right to the tax exemption provided for in article 20(1) of Decree-Law No. 423/83 of 5 December.

• Having received a draft decision denying the appeal, it exercised the right to prior hearing by registered letter sent on 16 June 2014, to which the AT replied inadequately, maintaining its position of denying the appeal and reiterating the legality of the levy.

• Not accepting such decision, it requested the constitution of an arbitral tribunal, maintaining the grounds of the previous appeal.

• As regards the expiration of the right to levy, account must be taken that the levy of the IMT tax relating to the acquisition of fraction BY of the urban property…, which occurred on 19/06/2006, had already been effected at the moment of execution of the deed of sale, because the operation of recognition of the exemption provided for in article 20 of Decree-Law No. 423/83 of 5 December, carried out by the Notary in the deed of sale and purchase, falls within the levy procedure provided for in articles 69 to 80 of the General Tax Code.

• Having the tax act, relating to the levy of the tax, occurred on 19 June 2006, could only be revised until 19 June 2010, because the case does not fall under the eight-year expiration period provided for in article 35 of the IMT Code but rather the period of article 78 of the General Tax Code.

• From the fact that currently situations of exemption require intervention of the tax services, with issuance of a zero-amount guide (article 10 of the IMT Code), there cannot, under pain of unconstitutionality, due to violation of the principles of equality and legality, result different treatment for equal situations according to the convenience of the AT, because in 2006, the recognition and the operation of levy were the competence of the Notary, being, instead of a zero guide, placed in the deed the mention of the application of the exemption to the specific case.

• The expiration of the right to revise tax acts and the possibility of effecting additional levy is verified pursuant to articles 78 of the General Tax Code and 31 of the IMT Code, whereby the levy of the tax, in the amount of €27,006.53, which constitutes an additional levy, could only be effected within the period of four years following the levy (article 31(3) of the IMT Code).

• Article 35 of the IMT Code does not apply because the basis of the additional IMT levy is not based on the verification of an ancillary fact on which the exemption depended (resolutive condition) nor did the Tax Inspection invoke any new facts that were not known at the moment of execution of the deed of sale and purchase of the property.

• The tax procedure is furthermore illegal (article 123(1) of the Administrative Code and 124(1)(c) of the Administrative Code and article 268(3) of the Constitution) due to lack of grounds for the notices received by the Claimant regarding the conclusions of the inspection and grounds for the levy, not being able to ascertain what is the moment at which, in the opinion of the AT, the tourist enterprises should be considered "installed" - whether on the date of attribution of the tourism use license, whether on the date when the fractions are made available to the public or on any other date - not locating this moment in the facts at issue, which renders the decision voidable (article 135 of the Administrative Code).

• Even if it were grounded, the decision violates the right of the Claimant because it is not correct as to the scope of the tax benefit in question, by considering that article 20 of Decree-Law No. 423/83 of 5 December is not applicable to properties or autonomous fractions that form part of an already constructed and installed tourist enterprise.

• Article 20(1) of Decree-Law No. 423/83 of 5 December regulates an objective exemption, saying nothing regarding the subjects of this exemption which according to the AT could only be the constructor of the enterprise, the property promoter or an entity that licensed and/or operated the enterprise.

• What results from the provision is that the acquirer of the property or fraction shall benefit from the exemption without having to practice all acts tending towards installation provided that it affects juridically and economically the property it acquired so as to make possible the complete installation of a tourist enterprise, it being fundamental to identify the concept of installation.

• It results from the deed of sale and purchase that the autonomous fraction constitutes a tourist apartment of the Tourist Complex "C…", subject to the Legal Framework for Installation, Operation and Operation of Tourist Enterprises (article 14(1)), approved by Decree-Law No. 39/2008 of 7 March (RJIEFE), of plural ownership (article 52 of RJIEFE), a regime different from that of co-ownership (article 1043(1) of the Civil Code), because it establishes a legal relationship and specific duties between the owners and the enterprise operator (articles 45 and 46 and articles 52 to 64 of RJIEFE), with imposition on the owners of duties restrictive of their property right, being able only to use the fraction in accordance with the content of the operating contract and to make periodic payments due to the enterprise operator.

• The phase of installation of the tourist village, according to RJIEFE, only ends when exploitation and operation of the enterprise can begin, i.e., when the property is apt for tourist operation, which only happens at the moment the fraction is delivered for tourist operation, which means that in this case of non-coincidence between the promoter of the tourist enterprise and the person selling the fraction, it only became subject to tourist operation after acquisition by the Author, thus true promoter of a plural tourist enterprise.

• The acquisition of the fraction (accommodation unit) by the Author marks the relevant moment for determining the application of the provisions of article 20(1) of Decree-Law No. 423/83 of 5 December, because it is at that time that the tourist apartments become apt to develop tourist operation, which only then can function and be open to the public as an integral part of the Tourist Complex, which is being installed as the autonomous fractions are acquired by investors, such as the Author.

• In the case of the present proceedings, there is an error of law on the part of the AT insofar as it did not recognize the applicability of the automatic exemption provided for in article 20 of Decree-Law No. 423/83 of 5 December, and denied the right of exemption to the Claimant.

• Whereby the Illegality of the IMT Payment Order contained in Official Notice No…, of 28 November 2013, from the Tax Service of ... … (…), and of the decision rendered on the Gracious Appeal presented, relating to the aforementioned Payment Order, should be declared.

8. The Respondent's Response

The Respondent responded, in summary (also at our responsibility), that:

• The evidence made in the present proceedings (final inspection report) that the tourism use license was issued by the CM of ... on 30/09/2005 leads to the conclusion that at the date of acquisition of the fraction the tourist enterprise in question was already installed and in operation phase.

• But as regards the scope of application of the IMT exemption, it is immaterial whether the acquisition occurred before or after the enterprise was already installed and operating, what matters rather, for purposes of the said exemption, is whether the acquisition of the fraction was intended for the installation of a tourist enterprise or for mere operation.

• As regards the expiration period of the right to levy IMT, the Respondent does not accept the thesis of the Claimant that the expiration period applicable to the IMT levy now disputed is the 4-year period provided for in article 31(3) of the IMT Code counted from the deed of sale and purchase (the time when a "zero-amount levy" would have been issued).

• The expiration period applicable to the situation in the present proceedings is the 8-year period counted from the verification of the exemption requirements (article 35(1) of the IMT Code) and the IMT was levied in accordance with the provisions of article 18(1), read in conjunction with article 17(d), both of the IMT Code.

• Article 31(3) of the IMT Code provides that the right to levy tax can only be exercised for up to 4 years counted from the levy to be corrected, except if the additional levy is based on omission of goods or values, in which case the additional levy can be made after those four years but not exceeding 8 years counted from the tax event.

• The levy now notified would only be an additional levy if a levy had occurred at the time of transmission; however, the tax benefit of IMT exemption provided for in article 20(1) of Decree-Law No. 423/83 is a benefit of an automatic nature, which flows directly and immediately from the law, that is, it operates by force of law without requiring the performance of any administrative act, and no levy was issued at the time of execution of the deed of sale and purchase of the property.

• This situation falls within article 10(8) of the IMT Code, and the Claimant cannot feign the existence of a levy for the sole purpose of the levy in question being able to assume the nature of an additional levy, with application of the four-year period established in article 31(3) of the IMT Code.

• As the Claimant itself acknowledges, at the time of execution of the deed of sale and purchase it was not the tax services that verified the exemption, and no levy existed at the moment of transmission of the property.

• In this regard, jurisprudence of the STA can be verified (Case 0294/11 of 14-09-2011), recognizing that "additional levy is nothing more than the correction of a deficient levy as a result of errors or omissions, which can be the responsibility of either the services or the taxpayers", and (...) presupposes that there was a prior levy (relating to the same tax event, the same taxpayer and the same period of time), which it is intended to correct or rectify because, due to an error of fact or law or by an omission or inaccuracy made in the declarations provided for purposes of levy, the collection of an amount of tax lower than due was determined".

• In the case of the present proceedings the AT was not prevented from levying the tax given the content of article 45(1) in fine of the General Tax Code, read in conjunction with article 35(1) of the IMT Code, verifying that the right to levy the missing tax would only expire if the same was not validly notified to the Claimant within 8 years from the said transmission.

• As to the lack of grounds for the notices, the Claimant is not correct because, as can be proven by the documents attached to the administrative file, the notifications made to it comply with all the requirements of article 77 of the General Tax Code.

• From the content of its request for arbitral decision it can be inferred that it understood the reasons and grounds invoked by the AT, it being that the Claimant does not agree with the decision notified and therefore refutes it specifically, which would not happen if it had not completely understood the grounds of the act in question.

• The Claimant cannot claim that it does not know the "cognitive" and evaluative process underlying the levy here in question when it confirms and admits that it was notified of the Inspection Report, and thereby also was, of the essential elements of the levy, all of this in accordance with law.

• As to the scope of application of article 20 of Decree-Law No. 423/83, what is at issue is the determination of the meaning and scope of article 20(1) of Decree-Law No. 423/83 of 05/12, as regards the text "acquisitions of properties or autonomous fractions intended for the installation of enterprises qualified as of tourism utility".

• The question is whether from that rule only acquisitions of properties or autonomous fractions by promoters with a view to constructing and installing tourist enterprises benefit, or also acquisitions of autonomous fractions (accommodation units), belonging to or integrated in already constructed and installed enterprises, with a view to their operation.

• The acquisition effected by the Claimant, already at a moment after the date of the license, after the phase of installation of the tourist enterprise, is intended for commercial operation.

• It is customary for acquirers of fractions in tourist enterprises in plural ownership to execute contracts for tourist operation intended to ensure the unity and continuity of operation by the operator of the tourist enterprise, as well as the permanent dedication to tourist operation of all accommodation units that make up the enterprise.

• The restrictions and obligations associated with the acquisition of the autonomous fraction correspond to a new paradigm of operation of tourist enterprises in plural ownership.

• As can be read in the Decision of the STA delivered on 23/01/2013 in case No. 0968/12: "In summary, from the reading of the regime contained in articles 5 to 6 and 23 to 40 of Decree-Law No. 39/2008 it is verified that the concept of 'installation' has nothing to do with 'operation' and 'exploitation' and that in the former fall only, as mentioned by the Revenue, the acts, the operations and the procedures tending towards the construction/creation of tourist enterprises."

• The reason and purpose of article 20(1) of the said Decree-Law No. 423/83 of 05/01 is to benefit with the exemption of IMT the promoters who intend to construct/create establishments (or readapt and remodel existing fractions), "and not when it is a matter of mere acquisition of fractions (or accommodation units) integrated in the enterprises and intended for operation, even if they are acquired on a date prior to the installation/licensing of the enterprise itself"

• In fact, when individuals acquire the fractions they do so as consumers of a tourist product that was put on the market by the promoter with a view to operation.

• The benefit only has justification in relation to those who proceed with the installation of the enterprise and put it on the market and not in relation to all those who use and operate it, even if through the purchase of its units.

• That the legislator only wished to cover with that rule acquisitions intended for the "installation" of enterprises results from the literal element of interpretation for if the legislator wished to cover the activity of installation and that of operation of tourist enterprises it would have been as clear as it was in article 16 of the same diploma, whose normative intention was to benefit both companies as owners and operators, similar to what happens with article 20(2).

• When the legislator, in article 20(2) of the same diploma, exceptionally extends the exemption provided for in article 20(1) to acquisitions in favor of an operating company, in the restrictive circumstances that it describes, it is clear in excluding from that benefit all remaining transmissions.

• The distinction between, on the one hand, the concepts of "installation" and of "operation" and "exploitation", on the other, is well evident in the preamble of Decree-Law No. 39/2008.

• The acquisition in question does not benefit from the IMT exemption provided for in article 20(1) of the said Decree-Law 423/83, referring on the basis of the above-mentioned Decision whose jurisprudence is reiterated in other Decisions of the STA and diverse jurisprudence of Arbitral Courts, whereby the action should be judged without merit, absolving the Respondent entity from the claim.

9. Questions to be Decided

The questions on which the tribunal must pronounce itself are:

a) What is the expiration period of the right to levy applicable in the case of the present proceedings: the general 4-year period, pursuant to articles 45 of the General Tax Code and 31(3) of the IMT Code or the 8-year period provided for in article 35(1) of the IMT Code.

b) Verification of a defect of form, due to lack of grounds, in the procedures relating to the levy and collection of the tax.

c) Whether the attribution of different effects to notarial intervention in the recognition of exemptions (in 2006) compared to the effects attributed to the current intervention of the tax services, with issuance of a zero-amount guide (article 10 of the IMT Code) constitutes a violation of the constitutional principles of equality and legality.

d) Determination of the meaning and scope of article 20(1) of Decree-Law No. 423/83 of 05/12, as regards the text of the rule "acquisitions of properties or autonomous fractions intended for the installation of enterprises qualified as of tourism utility", so as to decide whether the acquisition by the Claimants of autonomous fractions followed by execution of an operation contract with another entity that operates the complex still constitutes "installation".

10. Sanation

The Tribunal is materially competent and is regularly constituted, pursuant to articles 2(1)(a), 5(2), and 6(1) of RJAT.

The parties have legal personality and capacity, are legitimate and are legally represented, pursuant to articles 4 and 10(2) of RJAT and article 1 of Ordinance No. 112-A/2011 of 22 March.

The proceedings do not suffer from defects that would invalidate them.

Wherefore it proceeds to the merit decision.

II - GROUNDS

11. Proven Facts

11.1. On 19/06/2006, the Claimant acquired from company B… S.A., legal entity No…, for the price of €415,485.00 (four hundred fifteen thousand four hundred eighty-five euros), the autonomous fraction designated by the letters BY, corresponding to real property fraction No…, on the floor…, Building…, identified as F, eleven, of the urban property situated in…, parish of ..., municipality of ..., designated as Lot…, I.P.P…, zone…, subzone…, registered under article…, of the parish of …, and described in the Real Property Registry of ... under No…, according to document No. 1 which is attached and is given as fully reproduced (article 2 of the request for decision, Nos. 3 and 6 of the Response, deed contained in doc. No. 1, attached with the Request for decision and given as reproduced).

11.2. The property referred to in the preceding number forms part of the tourist complex "C…", located at Avenue of …, municipality of ..., to which was granted, on 30/09/2005, the tourism use license No. …/05, issued by the Municipal Chamber of ... (article 3 of the Request and article 3 of the Response).

11.3. The status of public utility for the tourist enterprise referred to in the preceding number, requested by "B…, C…" S.A., was the object of prior recognition by dispatch of the Secretary of State for Tourism of 02/06/2005 (Official Journal No…, …, of 15/06/2005), and subsequently confirmed by dispatch of the Secretary of State for Tourism of 07/05/2007 (Official Journal No…, …, of 11/06/2007), valid for seven years from the date of attribution (articles 6 and 8 of the Request and Documents Nos. 2 and 3 attached with the Request).

11.4. In the deed of sale and purchase, executed on 19/06/2006, the Notary inserted in the text: "This transfer is exempt from the payment of the Municipal Tax on Onerous Real Estate Transfers, pursuant to the provisions of article 20 of Decree-Law No. 423/83 of 5 December (article 7 of the Request and Doc. No. 1 - deed of sale and purchase - attached to the file with the Request).

11.5. On 25 July 2013, and in compliance with dispatch No. DI2013…, the Tax Inspection Division …, of the Finance Office of Faro, notified the Claimant that it had verified that in the deed executed on 19 June 2006, of sale and purchase of fraction BY (identified above) it had been declared that the acquisition was exempt pursuant to article 20 of Decree-Law No. 423/83 of 5 December, and therefore, expressing disagreement, requested information on the proof of IMT levy, or justification for its non-levy, in the event that the taxpayer considered it not to be due (PA, gracious appeal part 3, fs. 27).

11.6. An internal inspection action, partial in scope regarding the Municipal Tax on Onerous Real Estate Transfers (IMT), relating to the 2006 tax year, executed in compliance with Internal Service Order No. OI2013… of 12/08/2012 and carried out on 12 September 2013, concluded that the Claimant had improperly benefited from the exemption provided for in article 20 of DL 423/83 of 5/12, a draft report being prepared, notified to the claimant on 16/09/2013, in which it was concluded that the payment of IMT relating to that acquisition was missing, in the amount of €27,006.53, by application of the rate of 6.5% to the amount of €415,485,000 (notice No… and draft inspection report PA – gracious appeal part 3, fs. 28 and ff).

11.7. The Claimant did not comment on the content of the draft Tax Inspection Report made under the OI 2013… that was notified to it via registered mail at the address of its fiscal representative on 16 September 2013, for purposes of prior hearing (PA, information of 27/11/2014).

11.8. The draft Inspection Report, by dispatch of the Director of Finance of 10/10/2013, was converted into a final Report, maintaining the correction of the taxable matter in the amount of €415,485,000 and the calculation of the missing IMT levy, by application of the rate of 6.5% to the amount of €27,006.53, on the grounds that the passive subject had improperly benefited from the exemption provided for in article 20 of DL 423/83 of 5/12 (PA - gracious appeal - part 4).

11.9. The Tax Inspection Report was sent to the Tax Service of... … by notice No. DFF/…/2013, dated 11/10/2013 (PA - gracious appeal part 4, fs. 38).

11.10. The Tax Service of... … (…) sent to the Claimant through official notice No…, dated 28 November 2013 and received on 4 December 2013, notification that it should "within thirty days request guides at that Tax Service for payment of the amount of €27,006.53 of IMT, due to the fact that it had acquired fraction BY of the urban property…, of the parish of…, on 2006-06-19, with the benefit of tourism utility improperly recognized, according to the report prepared by the Tax Inspection Service of the Finance Office of Faro" and that after that deadline, if payment was not shown to have been made, a certificate would be extracted for compulsory collection, with accrual of default interest beginning to run, pursuant to article 38(3) of the IMT Code, also informing that from the said levy the claimant could file a gracious appeal or judicial challenge in accordance with the applicable provisions of the Tax Code (Doc. No. 4 attached with the Request and administrative file, information of 27 November 2014 of the Tax Service of... …).

11.11. The Claimant filed at the Tax Service of ...… a Gracious Appeal of the levy referred to in the preceding number, through registered mail on 2 April 2014 (Doc. No. 5 attached with the Request) which gave rise to the administrative file of gracious appeal No. …2014… (PA, gracious appeal - part 1 and part 2).

11.12. Through official notice No…, dated 27/05/2014, the Claimant was notified of a draft decision on the appeal and to exercise the right to prior hearing (PA - gracious appeal part 6 and doc. No. 6 attached with the Request), which it exercised by registered mail on 16/06/2014 (Doc. No. 7 attached with the Request).

11.13. The final decision denying the Gracious Appeal was rendered on 25 June 2014 and notified to the Claimant on 27 June 2014, through official notice No. … of (doc. 8 attached with the request and PA - gracious appeal part 7).

12. Not Proven

The facts established as proven suffice for consideration of the question of law, there being no unproven facts relevant to the resolution of the present dispute.

13. Grounds of Proof

The establishment of facts was made on the basis of facts alleged by the parties and not contested, as well as on the documentation attached to the file, including the administrative file.

14. Application of Law

14.1. Preliminary Matter – the Object of the Present Request for Decision

The Claimant asks the arbitral tribunal for the "declaration of illegality of the IMT levy in the amount of €27,000.53, underlying the Payment Order contained in Official Notice No…, of 28 November 2013, from the Tax Service of... …, considering that the levy and the decision denying the gracious appeal did not violate either the ordinary law applicable to the case or any constitutional norm or principle;

According to article 2 of the Legal Framework for Tax Arbitration, the jurisdiction of arbitral tribunals comprises the following claims: "a) The declaration of illegality of acts of levy of taxes, of self-assessment, of withholding at source and of payment on account; b) The declaration of illegality of acts of determination of taxable matter when not giving rise to the levy of any tax, of acts of determination of the taxable amount and of acts of determination of property values" (as amended by Law No. 64-B/2011 of 30 December, article 160)[1].

Despite the ambiguity of the formulation used in various passages of the request for decision, when it identifies as the object thereof the illegality of the payment order, it appears, however, that the Claimant aims at the consideration of the legality of the levy.

This is apparent in various points of the Request, where the Claimant refers to the previous "filing of a Gracious Appeal of the levy" (article 10), admits that "the AT presented to the Author the levy of the supposedly due tax, now proceeding to its collection (article 18) and states "Thus, verifying that the levy of the tax took place, the amount of €27,006.53 which the AT now demands was determined by means of an act of revision of tax acts embodied in an additional levy" (article 48).

And, despite the also imprecise formulation used in the gracious appeal, the appellant then stated in point 14 of the respective submission: "The Tax Services presented to the appellant the levy of the supposedly due tax, now proceeding to its collection" and in the exercise of prior hearing stated (article 1): "The Appellant filed a gracious appeal relating to the IMT levy for the acquisition of fraction BY of the urban property…, of the parish of …, on 19 June 2006".

And, without doubt, the decision on the gracious appeal considered the legality of the levy rejecting the appellant's arguments regarding expiration of the right to levy, lack of grounds and denial of application of the tax benefit provided for in article 20 of Decree-Law No. 423/83.

Thus, it is understood that when the Claimant requests in the Request for decision the consideration of "the decision rendered on the Gracious Appeal" it aims at the consideration of a decision that considered the legality of the act of levy.

For that matter, only with that object would it be possible to accept the present Request since arbitral tribunals are tasked with consideration not of the legality of decisions denying gracious appeals in themselves, but of the legality of the act of levy that is the object of the gracious appeal.[2]

Thus, and because it is considered that the Claimant, albeit sometimes in an ambiguous manner, aimed at the consideration of the legality of the levy[3], the arbitral tribunal considers itself competent to decide the Request, proceeding to analyze the three questions identified as grounds for invalidity of the act of levy: the expiration of the right to levy, the insufficiency of grounds notified and the erroneous interpretation of article 20 of Decree-Law No. 423/83 of 5 December.

14.2. Expiration of the Right to Levy

14.2.1. Applicable Law

The Claimant considers that there was, on 19 June 2006, with the execution of the deed of sale and purchase, a first levy – at zero – due to recognition by the Notary of the exemption provided for in article 20 of Decree-Law No. 423/83 of 5 December, whereby the revision of that first levy could only be effected until 19 June 2010, by application of the expiration period of the right to levy provided for in articles 78 of the General Tax Code and 31 of the IMT Code, the eight-year period provided for in article 35 of the IMT Code not being invocable.

The Respondent contends that the expiration period applicable to the situation in the present proceedings is the 8-year period counted from the verification of the exemption requirements article 35(1) of the IMT Code, the IMT having been levied in accordance with the provisions of article 18(1), read in conjunction with article 17(d), both of the IMT Code.

Article 31(3) of the IMT Code defines, as a general rule in case of additional levy, the 4-year period counted from the levy to be corrected but, in the present case, the exemption of IMT provided for in article 20(1) of Decree-Law No. 423/83 was considered applicable, a benefit of an automatic nature, with no levy having been issued when the deed of sale and purchase of the property was executed, whereby by application of article 45(1) in fine of the General Tax Code, read in conjunction with article 35(1) of the IMT Code, the right to levy the missing tax would only expire if the same was not validly notified to the Claimant within 8 years from the said transmission.

On this matter the tribunal considers that the position of the Respondent should prevail.

When in a transaction subject to taxation the tax is not applied, on the basis of an exemption, no levy is verified. And, there being no levy in the transmission, the levy that may subsequently occur cannot be qualified as additional, since additional levy presupposes that there was a prior levy deficient as a result of errors or omissions.

Beyond the Decision of the STA, referred to by the Respondent, delivered on 14 September 2011 in case 294/2011, other jurisprudential decisions may be cited, specifically the decisions mentioned in that same decision.

In the Decision of 17 January 2007 (case 909/06) it is stated that "additional levy is nothing more than the correction of a deficient levy as a result of errors or omissions, which can be the responsibility of either the services or the taxpayers". Considering that in the case there under consideration a contract had been executed without there being a levy of transfer tax but where the requirements were gathered that on the date of execution of the business there should be a levy of tax, it was concluded that having not been any prior levy to the levy now in question this could not be qualified as additional.[4]

Also in the Decision delivered on 14 September 2011, in case 0153/11, the STA concluded that "The levy of transfer tax effected as a consequence of inspection carried out on a taxpayer who at the act of transmission of goods was shown to be exempt from that tax is not, therefore, an additional levy since it was not intended to correct a prior levy defective due to error of fact or law or due to omissions or inaccuracies made in the declarations provided for purposes of levy" (section II of the summary)[5].

Although the tax event occurred earlier, it cannot be inferred, without more, that there was a levy from which no tax would have resulted to be paid due to the taxpayer being exempt therefrom, but rather that by force of that exemption no transfer tax levy was then proceeded with. The levy subsequently effected as a consequence of inspection carried out on the taxpayer is not, therefore, an additional levy because it was not intended to correct a prior levy defective due to error of fact or law or due to omissions or inaccuracies made in the declarations provided for purposes of levy. Hence the expiration period provided for in article 111(3) of the Transfer Tax Code was not applicable in that case but the eight-year expiration period provided for in article 92 of the same Code.

In the case under consideration in the present proceedings, the fact that the Notary involved in the deed declared the application of an exemption does not constitute a different presupposition from those existing in the decisions cited above.

Because from the combination of various norms of the IMT Code[6] it is not possible to conclude that the non-requirement by the Notary, at the moment of execution of a notarial deed, of prior levy of the tax, by accepting the interpretation that a tax benefit was applicable, constitutes the practice of a tax act.

The IMT Code is very clear in qualifying the intervention of the Notary and of other public authorities as "cooperation" with the Tax Authority – it is a matter of verifying (inspecting) whether there was payment of tax or whether the requirements provided for in the norms of exemption are invoked.

In the case of the present proceedings, at the date of the deed, article 49(3) provided, in the alternative, two situations of exemption: while in situations dependent on prior recognition the Notary had to require the document proving that recognition (by the competent services, of the tax authority, obviously) which it filed, in cases of automatic exemption, it said "the entities referred to in article 1 must verify and record the exemption".

But this did not constitute any attribution to notaries of competence to interpret and apply tax norms, in all cases where the enjoyment of a tax benefit did not depend (case of article 20(1) of DL 423/83) on prior official recognition.

At that time article 10 of the IMT Code also said, in article 1 that: "Exemptions are recognized at the request of the interested parties, to be submitted before the act or contract that gave rise to the transmission with the competent services for the decision, but always before the levy that would have to be effected" but in the following articles it distinguished various situations, corresponding to the exemptions provided for in articles 6 to 9, some regarding the intervention of various entities in the procedure and others of automatic recognition[7].

With the amendment given by Law No. 64-A/2008 of 31/12 (which approved the Budget for 2009), article 10 distinguishes in a more developed manner cases of exemptions of prior recognition and automatic recognition, including in article 8, the exemptions contained in legislation outside the present code, as exemptions of automatic recognition, with their verification and declaration being the competence of the tax service where the declaration provided for in article 19(1) is submitted.

And article 43 went on to provide (in accordance with the provisions of article 10(8)) that where an exemption applies, the entities referred to in article 1 must record the exemption and require the document proving it which they file[8].

The IMT exemption provided for in article 20 of Decree-Law No. 423/83 is, precisely, a case provided for in legislation outside the Code maintained in force after the approval of the Reform of Property Taxation[9].

From the combination of the referred norms, and despite the original wording of article 10, in force at the time of the deed in the case of the present proceedings, not expressly mentioning the manner of action in case of exemptions provided for in outside laws, did not result the attribution to the Notary of competence for the practice of tax acts of recognition of exemption.

The interpretation most consonant with the remaining norms of the legal system (article 9 of the Civil Code) is that, it being the responsibility of the Notary to verify the requirements for application of the exemption norm, it should collect the elements necessary for the qualification of the situation, accepting the declarations and characterization made by those involved in the transaction[10]. If a more complex situation were revealed, dependent on interpretation of tax norms it should the Notary, in the absence of specific competence in tax matters, request prior clarification of the situation from the competent services or adequately evidence the cases in the list sent subsequently to the Tax Authority.

Not being perceived, neither by the intervening authority, nor by the parties, of an erroneous legal characterization, taxpayers remain subject to possible detection of the improper treatment as exemption, the situation being the object of a subsequent levy.

That is what happened: the AT, detecting through inspection action that the transmission of property corresponded to an acquisition of a fraction in a tourist enterprise, the promotion of which had belonged to the selling company, understood that to the tax situation there corresponded not an exemption but rather levy of IMT, having considered applicable the provisions of article 45(1) in fine of the General Tax Code, read in conjunction with article 35(1) of the IMT Code, exercising the right to levy the tax within the 8-year period from the said transmission, which occurred without any levy of tax.

It should be noted that the jurisprudential decision recently attached to the file by the Claimant - Decision of 15/10/2002, delivered by the Court of Appeal in case 1653/99 - in no way reinforces the thesis of the Claimant regarding the concept of levy and the expiration of the exercise of its right (it is thought that that may have been the intention) particularly because the situation there considered is quite different from that which is the object of the present proceedings.

In the case of the present proceedings, there was no levy of IMT at the moment of the deed because it was accepted by the Notary involved that, given the elements submitted by the buyer, the latter was covered by an exemption norm, but, as we argue above, there was no levy of tax.

In the case decided by the Decision of the Court of Appeal, what was at issue was a levy of personal income tax: the taxpayer made, in 1997, its income consolidation return, considering part of the income earned in 1996 covered by a tax benefit, which was immediately rejected by the central services that invited the taxpayer to submit a return of correction and, subsequently, proceeded to a levy.

Having continued to intend to discuss the case, without challenging the levy, and having appealed only from a later act of the Secretary of State for Tax Affairs, in 1998, it saw its appeal rejected for lack of right of appeal, since the appealed act was configured as a merely confirmatory act.[11]

Thus, the ground of expiration of the right to levy is without merit.

14.2.2. On the Constitutionality of the Interpretation Adopted

And also the invocation by the Claimant of unconstitutionality due to violation of the principle of tax equality, comparing the intervention of the Notary in 2006 with a zero-amount levy by the tax services (solution introduced in 2010) is without merit.

In the first place, it does not seem proper to invoke treatment violating equality when one compares, as the Claimant itself sets out, regimes that succeeded one another in time, possibly corresponding to different legislative wills.

But, in the case of the present proceedings, despite the legislative amendments that occurred between 2006 and 2010, what is relevant is the qualification of the situation of the Claimant, on either of the referred dates, as automatic recognition exemption.

In those cases, "the benefits are not granted by the tax administration, but established directly in the law, the subjective right to the corresponding benefit being born of the simple historical verification of its requirements", there being, in this measure, the need to prepare the Services toward a desirable control of these automatic tax benefits, giving effective execution to the final part of article 2(4) of the Tax Benefit Framework[12].

In this type of benefits passive subjects comply with certain procedures, objects of control by the administration, without ceasing to seek to achieve increasing debureaucratization and administrative simplification. Thus the levy of the tax on onerous transmission of real property (IMT, as previously transfer tax and also Stamp Tax due) is at the initiative of the interested parties, obligated to submit, in any tax service a duly completed statement[13].

The aforementioned amendment (Law No. 64-A/2008 of 31/12, which approved the Budget for 2009), of article 10 of the IMT Code maintains the distinction between exemptions of prior recognition and automatic recognition, and article 43 of the same Code went on to provide that the entities referred to in article 1 must record the exemption and require the document proving it which they file[14]. However, this does not truly correspond to the creation of a moment of levy by the AT services at the request of taxpayers, nor does it configure an act of granting of tax benefit, an administrative act, of a tax nature, constitutive of rights, under pain of erasing the difference between the two types of tax benefits (of prior recognition and automatic recognition)

The IMT Code was (and continues to be) very clear in qualifying the intervention of the Notary and of other public authorities as "cooperation" (article 49) with the Tax Authority – it is a matter of verifying (inspecting) whether there was payment of tax or whether the requirements provided for in the exemption norms are invoked. In the original wording, article 49(3) provided "Where an automatic exemption or exemption dependent on prior recognition applies, the entities referred to in article 1 must verify and record the exemption or require the document proving that recognition, which they shall file", distinguishing the two situations of exemption: while in situations dependent on prior recognition the Notary had to require the document proving that recognition (by the competent services, of the tax authority, obviously) which it filed, in cases of automatic exemption, the entities referred to in article 1 had to verify and record the exemption.

The procedural amendments that subsequently occurred resulted from critical reflections carried out, having in mind the simultaneous objectives of control and administrative simplification, as results from proposals contained in reports on "Simplification of the Tax System" (2005)[15] and Competitiveness, efficiency and fairness of the Tax System (2009)[16].

The proposal, contained in the latter report cited, of submission of the statement in the Tax Service would have objectives of quantitative control[17]. And it may be added, also possibly, of easier access to information by the Tax Authority. But the amendment introduced did not eliminate the differences existing between automatic benefits and benefits dependent on recognition, making their effects identical and standardizing procedures.

In article 10 of the IMT Code whose heading is "recognition of exemptions", different treatment is identified for various types of exemptions: those of prior recognition by dispatch of the member of Government responsible for the finance area on information and opinion of the Tax and Customs Authority (article 6); of prior recognition, by dispatch of the Director-General of Taxes on information of the competent services (article 7) and those of automatic recognition, with their verification and declaration being the competence of the tax service where the statement provided for in article 19(1) is submitted (article 8).

It is verified from the comparison of successive wordings that, possibly for reason of debureaucratization, there has been an increase in the number of situations included in automatic recognition. Article 10(8) classifies as automatic recognition benefits situations in which the benefit relates to objective elements, in some cases only confirmable later (case of acquisition of goods for certain purposes), and in which the State starts from the principle that the statement of the passive subject is sufficient basis for the requirement of the exemption to be considered met[18].

The IMT Code includes in the list of automatic recognition exemptions the case of "exemptions of automatic recognition contained in legislation outside the present code" (article 10(8)(d)), as is the case of the exemption provided for in article 20 of Decree-Law No. 423/83.

As already set out above, automatic tax benefits (article 10(8) of the IMT Code) and benefits "dependent on recognition" are not structurally identical, and what happens in the case of the present proceedings is that there was not, at the time of execution of the deed, the practice of a tax act. Whereby there does not exist a substantial difference of treatment of the situation of the present proceedings, before and after the amendments introduced in the IMT Code in 2010.

In relation to the invocation of unconstitutionality, this tribunal considers that neither the existence of two types of tax benefits, as regards the procedure necessary for their respective application, violates constitutional norms and principles nor does this happen with the alteration of procedures relating to automatic recognition benefits, as described.

There is, in particular, no violation of the principle of equality. The existence of the distinct recognition regimes, applicable to different situations, expressly provided for in law, does not constitute (contrary to what is claimed by the Claimant in citing the Decision of the Constitutional Court No. 306/2010 of 14 July 2010) an affront to the principle of generality, because it neither results in unequal treatment of equal situations, nor signifies a discrimination devoid of rationality. As in no way does the alteration of procedure regarding automatic recognition benefits undermine the principle of equality.

Thus it is concluded by the non-existence of the invoked violation of constitutional principles, in particular that of tax equality.

14.3. Violation of the Duty to Provide Grounds for an Administrative Act

The Claimant alleges that the decision is voidable due to violation of articles 123(1) of the Administrative Code and 124(1)(c) of the Administrative Code and article 268(3) of the Constitution, invoking that the decision of levy and collection of the tax suffers from a defect of form, due to lack of grounds, including due to "insufficiency or contradiction" (articles 76 and 72 of the Request).

The Respondent contends that it is proven by the documents attached in the administrative file and notifications made that all the requirements of article 77 of the General Tax Code were complied with, verifying that the Claimant knows the "cognitive" and evaluative process underlying the levy, given having refuted the decision notified to it specifically with which it demonstrates knowledge of its respective grounds.

Let us see.

The Claimant oscillates throughout the Request between speaking of the lack of grounds of "a notice" and "lack of grounds of the notices" (heading preceding article 60 of the Request).

In article 60 of the Request, it imputes the defect of insufficiency of grounds expressly to official notice No…, of 27 May 2014, attached as document No. 6. This is a notice notifying the attorney of the taxpayer that a draft decision is being sent in the gracious appeal proceedings No. …2014…, a copy of which is annexed.

In the gracious appeal, which ends by requesting (specifically due to lack of grounds) the revocation of notice No…, of 28 November 2013, the official notices No…, of 25/07/2013[19] and No…, of 13/09/2013[20] are identified in article 43 of the submission, under the heading "lack of grounds of the notices".

The appellant then objected (article 44 of the submission) because: "it does not ascertain what is the moment at which, in the opinion of the AT, the tourist enterprises should be considered 'installed', whether on the date of attribution of the tourism use license, whether on the date when the fractions are made available to the public or on any other date, not locating this moment in the facts at issue".

And it is on the basis of that difficulty of understanding that it considers the requirements required in the Administrative Code for adequate grounding of administrative acts not to have been met.

It is believed that the Claimant will have confused "lack of grounds" of the act with the absence of the grounds that it would consider correct – that is, we are not really confronted with the imputation of a defect of form, of lack of grounds, but with the imputation of violation of law, due to erroneous interpretation of the applicable law.

Indeed, having analyzed the administrative file it appears that the precepts of the Tax Inspection Procedure Code regarding notifications (articles 37 to 43)[21] and grounds for the report of the tax inspection action and of the tax acts on which it is based (articles 62 and 63) have been complied with.

Whereby the tribunal considers the invocation of the defect of lack of grounds capable of leading to the voidability of tax acts practiced in the proceedings without merit.

14.4. Application of Article 20 of Decree-Law No. 423/83 of 5 December

14.4.1. The Concept of Installation

The positions of the Parties in the proceedings are divergent as to the application of the tax benefits provided for in article 20(1) of Decree-Law No. 423/83 of 05/12, as regards the interpretation of "installation" of enterprises declared of tourism utility, the Claimant understanding that it includes the acquisition of autonomous fractions integrated in tourist enterprises in a regime of plural ownership, and the Respondent considering that this type of acquisition, situated in a moment after the date of issue of the license of use of the enterprise, is not integrated in the installation process, having as its destination commercial operation.

14.4.2. The Interpretation of Article 20(1) of Decree-Law No. 423/83 of 5 December – Uniformization of Jurisprudence

In the consideration and decision of a case such as the one which is the object of the present proceedings, it cannot fail to take into account the high number of Decisions already delivered by the Supreme Administrative Court, Tax Litigation Section, with emphasis on the existence of a decision delivered in enlarged proceedings, pursuant to the provisions of article 148 of the Administrative Code, on 23 January 2013, in case No. 968/12, which gave rise to the jurisprudence-uniformizing decision No. 3/2013, published in the Official Journal, 1st Series, of 4 March 2013.

It was a case of acquisition of a fraction integrated in a regime of plural ownership in a tourist enterprise to which had been recognized the status of "tourism utility".

The referred decision proceeded with literal interpretation of article 20(1) of DL 423/83, in conjunction with other norms of the same diploma (in particular articles 16(2) and 20(2)), analyzed legislation prior to and after DL 423/83 (whether norms relating to the exercise of tourist activity or of specifically fiscal character), having, as to the question of the concept of "installation"[22], decided by majority of Judges Councillors in exercise in the Section, that «The concept of «installation», for purposes of the benefits to which article 20(1) of Decree-Law No. 423/83 of 5 December refers, relates to the acquisition of properties (or autonomous fractions) for construction of tourist enterprises, after the respective urbanistic operations have been duly licensed, aiming to benefit companies engaged in the activity of promotion/creation of the same and not acquirers of autonomous fractions in constructed/installed enterprises in a regime of plural ownership, since this has to do with «operation» and not with «installation»»[23].

Beyond the developed grounds contained in the Decision in question, let us retain the conclusions summarized in the respective "summary": "I – In determining the meaning and scope of tax norms and in qualifying the facts to which they apply the general rules and principles of interpretation and application of laws are observed", and "Whenever, in tax norms, terms proper to other branches of law are employed, they should be interpreted in the same sense which they have there, unless another results directly from the law" (article 11(1) and (2) of the General Tax Code). II – Within the scope of the legal framework for installation, operation and operation of tourist enterprises, established by Decree-Law No. 39/2008 of 7 March, the concept of installation of a tourist enterprise comprises the set of juridical acts and the formalities necessary for licensing (in a broad sense, comprising prior notifications or authorizations, as the case may be) of the urbanistic operations necessary for construction of a tourist enterprise, as well as the obtaining of the titles that make it apt to function and to be operated for tourism purposes (see Chapter IV, articles 23 et seq.). III – When the legislator uses the expression acquisition of properties or autonomous fractions intended for «installation», for purposes of the benefit to which article 20(1) of Decree-Law No. 423/83 of 5 December refers, it cannot fail to be understood as referring precisely to the acquisition of properties (or autonomous fractions) for construction of tourist enterprises, after the respective urbanistic operations have been duly licensed, aiming to benefit companies engaged in the activity of promotion/creation of the same. IV – This concept of «installation» is the one that proves adequate to all types of tourist enterprises and is not called in question by the fact that the enterprises can be constructed/installed in a regime of plural ownership, since this has to do with «operation» and not with «installation». V – In tourist enterprises constituted in plural ownership (comprising lots and or autonomous fractions of one or more buildings, pursuant to the provisions of article 52(1) of Decree-Law No. 39/2008 of 7 March), two distinct procedures stand out, albeit they can occur simultaneously: one relating to the practice of the operations necessary to install the enterprise; another, relating to the operations necessary to put it into operation and to operate it, with the sale of the units projected or constructed being necessarily part of the second. VI – The legislator intended to boost tourist activity by providing exemption/reduction of payment of Transfer Tax/Stamp Tax for promoters who intend to construct/create establishments (or readapt and remodel existing fractions), "and not when it is a matter of mere acquisition of fractions (or accommodation units) integrated in the enterprises and intended for operation, even if they are acquired on a date prior to the installation/licensing of the enterprise itself"

VII – Those who acquire the fractions do so as consumers of a tourist product that was put on the market by the promoter with a view to operation. VIII – The benefit only has justification in relation to those who proceed with the installation of the enterprise and put it on the market and not in relation to all those who use and operate it, even if through the purchase of its units. IX – That the legislator only wished to cover with that rule acquisitions intended for "installation" of enterprises results from the literal element of interpretation for if the legislator wished to cover the activity of installation and that of operation of tourist enterprises it would have been as clear as it was in article 16 of the same diploma, whose normative intention was to benefit both companies as owners and operators, similar to what happens with article 20(2). X – When the legislator, in article 20(2) of the same diploma, exceptionally extends the exemption provided for in article 20(1) to acquisitions in favor of an operating company, in the restrictive circumstances that it describes, it is clear in excluding from that benefit all remaining transmissions. XI – The distinction between, on the one hand, the concepts of "installation" and of "operation" and "exploitation", on the other, is well evident in the preamble of Decree-Law No. 39/2008. XII – The acquisition in question does not benefit from the IMT exemption provided for in article 20(1) of the said Decree-Law 423/83, referring on the basis of the above-mentioned Decision whose jurisprudence is reiterated in other Decisions of the Supreme Administrative Court and diverse jurisprudence of Arbitral Courts, whereby the action should be judged without merit, absolving the Respondent entity from the claim. XIII – This interpretive result is what results from the historical element, rational/teleological and also literal of the juridical norms in question. XIV – Tax benefits are measures of an exceptional character instituted for the protection of extrafiscal relevant public interests and that are superior to the taxation which they prevent (article 2(1) of the Tax Benefit Framework) (…)" and albeit admitting extensive interpretation (article 10 of the Tax Benefit Framework), it cannot be considered by the interpreter the legislative thought that does not have in the letter of the law a minimum of correspondence, albeit imperfectly expressed (article 9(2) of the Civil Code), furthermore because representing a derogation of the rule of equality and the principle of contributive capacity that materially grounds taxes, tax benefits must be justified by a relevant public interest".

This tribunal adheres to the grounds of the Jurisprudence-Uniformizing Decision No. 3/2013 and its respective conclusions. For that matter, it understands that, given the uniformization existing in jurisprudence and in accordance with the provisions of article 8(3) of the Civil Code[24], an identical solution would always be imposed in the case sub judice.

The Claimant brought no new grounds to the present proceedings, having directed much of the argumentation and production of proof to attempting to demonstrate that the grounds provided by the AT were obscure and insufficient regarding the concept of installation, omitting that the justifications presented were a summary and reflection of a legal debate framed by the uniformizing jurisprudential position defined in Jurisprudence-Uniformizing Decision No. 3/2013 of the STA.

It limits itself to invoking the objective nature of the exemption provided for in article 20(1) of Decree-Law No. 423/83 of 5 December, repeating that this is not restricted to the constructor of the enterprise, property promoter or entity that licenses and/or operates the enterprise, rather covering acquirers of the property or fractions even if they have not practiced the acts tending toward installation, provided they affect juridically and economically the property toward the installation of a tourist enterprise, in such a manner as to make possible its complete installation, in which respect the concept of installation is relevant.

But as already stated, this thesis is contradicted by the interpretation of article 20 of Decree-Law No. 423/83 made by the Decision of the STA of 23/01/2013 in case No. 0968/12: "(…) from the reading of the regime contained in articles 5 to 6 and 23 to 40 of Decree-Law No. 39/2008 it is verified that the concept of «installation» has nothing to do with «operation» and «exploitation» and that in the former fall only (...) the acts, the operations and the procedures tending toward the construction/creation of tourist enterprises."

As exhaustively analyzed in that Decision, the legislator, in establishing the exemption in article 20(1) of Decree-Law No. 423/83, abstained from the modes of financing adopted by promoters who, for construction of the enterprises, can use only own capital or have recourse to the product of the sale of the future fractions, through the execution of forward purchase agreements.

In this latter case, acquirers of the fractions do not become co-financiers of the enterprise, with responsibility for installation, since they are investing in property products within so-called residential tourism like any final consumer, whether the acquisition is completed on plan or after the enterprise is installed/constructed. "In truth, when individuals acquire the fractions they do so as consumers of a tourist product. The objective that moves individuals is the realization of their own investment, being able further to choose to be users of the enterprise[25] or to cede the operation, participating in its results (see article 45(4) of Decree-Law No. 39/2008). For although it is considered that the fractions become subject to operation, nothing prevents them from being occupied exclusively by their respective owners and for indefinite time, as derives, clearly, from legal provisions, such as those contained in articles 45(1) of Decree-Law No. 39/2008".

"The promoters of the enterprises are solely responsible for the property investment, the risk of the same falling upon them, as well as for obtaining the licenses necessary to make them apt for operation and exploitation. The tax benefit only has justification in relation to those who proceed with the installation of the enterprise and put it on the market and not in relation to all those who use and operate it, even if through the purchase of its units."

Indeed, the Claimant configures the typical situation of investor owners who opt for an investment in a tourist enterprise. Even if the form of financing chosen by the promoting company has been based on the very early commercialization of the fractions and that subsequently the operation of the property is done in an integrated manner, there is no transformation of property investors into investors/promoters of enterprises qualified as of tourism utility, covered by the tax benefits provided for in article 20(1) of DL 423/83.

For the reasons set out, the request also does not merit allowance as to the invoked coverage by the norm of exemption contained in article 20(1) of Decree-Law No. 423/83 of 5 December.

III. DECISION

15. In view of the above, the present Arbitral Tribunal decides:

a) To judge the request for declaration of illegality of the IMT levy in the amount of €27,000.53, underlying the Payment Order contained in official notice No…, of 28 November 2013, from the Tax Service of... … without merit, considering that the levy and the decision denying the gracious appeal did not violate either the ordinary law applicable to the case or any constitutional norm or principle;

b) To condemn the Claimant to pay the costs of the present proceedings.

16. Value of the Proceedings and Costs

The value of the proceedings is fixed at €27,000.53 (twenty-seven thousand and six euros and fifty-three cents) pursuant to article 97-A(1) of the Tax Procedural Code, applicable by force of article 29(1)(a) of RJAT and article 3(2) of the Regulation of Costs in Tax Arbitration Proceedings (RCPAT).

The amount of costs is fixed at €1,530.00, at the charge of the Claimant and calculated in accordance with Table I attached to the Regulation of Costs in Tax Arbitration Proceedings, all pursuant to articles 12(2) and 22(4) of RJAT and article 4 of RCPAT.

Let notification be made.

Lisbon, 22 May 2017.

The Arbitrator

Maria Manuela Roseiro

Arbitral Decision replaced by decision of 22 May 2017.

ARBITRAL DECISION

I - REPORT

1. On 1 September 2014, A…, with Tax Identification Number…, hereinafter referred to as the Claimant, resident in …, …, …, …, Hong Kong, submitted to the Administrative Arbitration Centre (CAAD) a request for constitution of a single arbitral tribunal, pursuant to the provisions of articles 10(1)(a) and 2(1)(a) of Decree-Law No. 10/2011 of 20 January (hereinafter referred to as RJAT), with a view to declaring the illegality of the IMT Payment Order in the amount of €27,000.53 (twenty-seven thousand and six euros and fifty-three cents), contained in Official Notice No…, of 28 November 2013, from the Tax Service of... … (…), and of the decision rendered on the Gracious Appeal, identified with No. …2014…, relating to the aforementioned Payment Order.

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

3. Pursuant to article 6(1) of RJAT, by decision of the President of the Deontological Board, Maria Manuela do Nascimento Roseiro, the undersigned, was appointed as sole arbitrator, who accepted the appointment within the legally prescribed period.

4. The parties having been notified and there being no refusal of the said appointment (articles 11(a) and (b) of RJAT and articles 6 and 7 of the Deontological Code), the arbitral tribunal was constituted on 13 November 2014, in accordance with the provisions of article 11(1)(c) of Decree-Law No. 10/2011 of 20 January, as amended by article 228 of Law No. 66-B/2012 of 31 December.

5. On 11 December 2014, the Tax and Customs Authority (AT or Respondent) submitted a Response and attached the administrative file, requesting exemption from the meeting provided for in article 18 of RJAT as well as from the presentation of submissions.

6. The Claimant agreed to the exemption from the meeting but not to the presentation of submissions, whereupon an arbitral order was issued for the respective presentation within a period of 15 days, running successively, and 28 March 2015 was set for the rendering of the arbitral decision.

7. After the presentation of submissions, the Claimant requested the attachment of a Court of Appeal Decision, which was accepted, changing the date of the decision to 2 April 2015; the Respondent was notified for possible submissions and responded on 31 March 2015.

8. Request for Arbitral Decision

The Claimant submits, in summary (at our responsibility), that:

• On 19 June 2006, it acquired from company B…, S.A., the autonomous fraction designated by the letters "BY", corresponding to real property fraction No…, on the floor…, Building…, identified as F, eleven, of the urban property situated in …, parish of …, municipality of ..., which forms part of the Tourist Complex "C…", to which was granted a Tourism Use License No. …/05, issued by the Municipal Chamber of ..., on 30 September 2005.

• The Tourist Complex "C…" comprises seven blocks and 95 tourist apartments constituted as autonomous fractions, corresponding to a tourist enterprise in plural ownership, pursuant to article 52 of Decree-Law No. 39/2008 of 7 March, a situation already foreseen in the previous legal regime contained in Decree-Law No. 167/97 of 4 July.

• At the time of execution of the deed of sale and purchase, there were presented the dispatch of the Secretary of State for Tourism of 2 June 2005 attributing tourism utility status by way of prior approval to the tourist enterprise and the tourism use license No. …/05 of 30 September 2005, issued by the Municipal Chamber of ..., relating to the property in its entirety, the Notary having inserted the following text: "This transfer is exempt from the payment of the Municipal Tax on Onerous Real Estate Transfers, pursuant to the provisions of article 20 of Decree-Law No. 423/83 of 5 December".

• By dispatch of the Secretary of State for Tourism of 23 May 2007, "the tourism utility, previously attributed to the Tourist Complex C…", was confirmed, pursuant to Decree-Law No. 38/94 of 8 February and Decree-Law No. 423/83 of 5 December, valid for a period of seven years, counted from the date of issue of the tourism use license by the Municipal Chamber of ... on 30 September 2005.

• On 4 December 2013, the Author was notified by official notice from the Chief of the Tax Service of... … (…), to "request payment guides at that tax service for payment of the amount of €27,006.53 of IMT, due to the fact that it had acquired fraction BY of the urban property…, of the parish of…, on 2006-06-19, with the benefit of tourism utility improperly recognized, according to the report prepared by the Tax Inspection Service of the Finance Office of Faro".

• On 2 April 2014, it submitted a Gracious Appeal of the levy invoking expiration of the right to revise the tax act recognizing exemption and the right to effect additional levy pursuant to article 31(3) of the IMT Code and illegality of the notice and tax procedure due to violation of the duty to provide grounds as required by articles 123(1), 124(1)(c) and 125 of the Administrative Code, as well as error of law regarding the non-verification of the right to the tax exemption provided for in article 20(1) of Decree-Law No. 423/83 of 5 December.

• Having received a draft decision denying the appeal, it exercised the right to prior hearing by registered letter sent on 16 June 2014, to which the AT replied inadequately, maintaining its position of denying the appeal and reiterating the legality of the levy.

• Not accepting such decision, it requested the constitution of an arbitral tribunal, maintaining the grounds of the previous appeal.

• As regards the expiration of the right to levy, account must be taken that the levy of the IMT tax relating to the acquisition of fraction BY of the urban property…, which occurred on 19/06/2006, had already been effected at the moment of execution of the deed of sale, because the operation of recognition of the exemption provided for in article 20 of Decree-Law No. 423/83 of 5 December, carried out by the Notary in the deed of sale and purchase, falls within the levy procedure provided for in articles 69 to 80 of the General Tax Code.

• Having the tax act, relating to the levy of the tax, occurred on 19 June 2006, could only be revised until 19 June 2010, because the case does not fall under the eight-year expiration period provided for in article 35 of the IMT Code but rather the period of article 78 of the General Tax Code.

• From the fact that currently situations of exemption require intervention of the tax services, with issuance of a zero-amount guide (article 10 of the IMT Code), there cannot, under pain of unconstitutionality, due to violation of the principles of equality and legality, result different treatment for equal situations according to the convenience of the AT, because in 2006, the recognition and the operation of levy were the competence of the Notary, being, instead of a zero guide, placed in the deed the mention of the application of the exemption to the specific case.

• The expiration of the right to revise tax acts and the possibility of effecting additional levy is verified pursuant to articles 78 of the General Tax Code and 31 of the IMT Code, whereby the levy of the tax, in the amount of €27,006.53, which constitutes an additional levy, could only be effected within the period of four years following the levy (article 31(3) of the IMT Code).

• Article 35 of the IMT Code does not apply because the basis of the additional IMT levy is not based on the verification of an ancillary fact on which the exemption depended (resolutive condition) nor did the Tax Inspection invoke any new facts that were not known at the moment of execution of the deed of sale and purchase of the property.

• The tax procedure is furthermore illegal (article 123(1) of the Administrative Code and 124(1)(c) of the Administrative Code and article 268(3) of the Constitution) due to lack of grounds for the notices received by the Claimant regarding the conclusions of the inspection and grounds for the levy, not being able to ascertain what is the moment at which, in the opinion of the AT, the tourist enterprises should be considered "installed" - whether on the date of attribution of the tourism use license, whether on the date when the fractions are made available to the public or on any other date - not locating this moment in the facts at issue, which renders the decision voidable (article 135 of the Administrative Code).

• Even if it were grounded, the decision violates the right of the Claimant because it is not correct as to the scope of the tax benefit in question, by considering that article 20 of Decree-Law No. 423/83 of 5 December is not applicable to properties or autonomous fractions that form part of an already constructed and installed tourist enterprise.

• Article 20(1) of Decree-Law No. 423/83 of 5 December regulates an objective exemption, saying nothing regarding the subjects of this exemption which according to the AT could only be the constructor of the enterprise, the property promoter or an entity that licensed and/or operated the enterprise.

• What results from the provision is that the acquirer of the property or fraction shall benefit from the exemption without having to practice all acts tending towards installation provided that it affects juridically and economically the property it acquired so as to make possible the complete installation of a tourist enterprise, it being fundamental to identify the concept of installation.

• It results from the deed of sale and purchase that the autonomous fraction constitutes a tourist apartment of the Tourist Complex "C…", subject to the Legal Framework for Installation, Operation and Operation of Tourist Enterprises (article 14(1)), approved by Decree-Law No. 39/2008 of 7 March (RJIEFE), of plural ownership (article 52 of RJIEFE), a regime different from that of co-ownership (article 1043(1) of the Civil Code), because it establishes a legal relationship and specific duties between the owners and the enterprise operator (articles 45 and 46 and articles 52 to 64 of RJIEFE), with imposition on the owners of duties restrictive of their property right, being able only to use the fraction in accordance with the content of the operating contract and to make periodic payments due to the enterprise operator.

• The phase of installation of the tourist village, according to RJIEFE, only ends when exploitation and operation of the enterprise can begin, i.e., when the property is apt for tourist operation, which only happens at the moment the fraction is delivered for tourist operation, which means that in this case of non-coincidence between the promoter of the tourist enterprise and the person selling the fraction, it only became subject to tourist operation after acquisition by the Author, thus true promoter of a plural tourist enterprise.

• The acquisition of the fraction (accommodation unit) by the Author marks the relevant moment for determining the application of the provisions of article 20(1) of Decree-Law No. 423/83 of 5 December, because it is at that time that the tourist apartments become apt to develop tourist operation, which only then can function and be open to the public as an integral part of the Tourist Complex, which is being installed as the autonomous fractions are acquired by investors, such as the Author.

• In the case of the present proceedings, there is an error of law on the part of the AT insofar as it did not recognize the applicability of the automatic exemption provided for in article 20 of Decree-Law No. 423/83 of 5 December, and denied the right of exemption to the Claimant.

• Whereby the Illegality of the IMT Payment Order contained in Official Notice No…, of 28 November 2013, from the Tax Service of ... … (…), and of the decision rendered on the Gracious Appeal presented, relating to the aforementioned Payment Order, should be declared.

[The second decision text that follows is identical to the first, indicating this is the replacement decision with the same content.]