Process: 649/2014-T

Date: June 18, 2015

Tax Type: IMI

Source: Original CAAD Decision

Summary

This CAAD arbitration case (Process 649/2014-T) addresses whether IMI (Municipal Property Tax) exemption for tourist utility properties transfers to subsequent purchasers. Three Chinese nationals purchased autonomous fractions of a 5-star tourist complex (G...) in late 2013 from the original developer. The complex had obtained tourist utility classification from Turismo de Portugal in 2010, and the original owner secured a 7-year IMI exemption starting in 2011 under Article 47 of the Tax Benefits Statute (EBF). When the Tax Authority assessed IMI for 2013 against the new owners, they challenged the assessments, arguing the exemption is objective (attached to the property) rather than subjective (attached to the taxpayer), and therefore should continue benefiting any owner during the 7-year period. The Tax Authority contested this position on multiple grounds: first, questioning CAAD's material jurisdiction over exemption recognition matters; second, arguing that Article 47 EBF exemptions apply only to property acquisitions for installing new tourist undertakings, not for operating existing ones; and third, invoking Article 15 EBF which prohibits inter vivos transfer of tax benefits. The Authority distinguished between the installation phase (which justifies exemption) and the operation phase (which does not), emphasizing that the claimants purchased already-operational units rather than installing a new tourist facility. The case raises fundamental questions about the nature and transferability of real estate tax exemptions in Portugal's tourist accommodation sector, with significant implications for foreign investors acquiring units in established tourist developments.

Full Decision

ARBITRAL DECISION[1]

Report

A - General

A..., taxpayer no. ..., resident in ..., number ..., ..., ..., ..., Guangzhou, in the People's Republic of China; B..., taxpayer no. ..., resident in ...-...-..., ..., ..., district of ..., Beijing, in the People's Republic of China and C..., taxpayer no. ..., resident in ..., ..., ..., ..., ..., ..., district of ..., Xiamen, in the People's Republic of China (hereinafter referred to as "Claimants"), filed, on 01.09.2014, a request for constitution of a single arbitral tribunal in tax matters, which was accepted, aiming at: (i) the annulment of the assessment acts relating to the Municipal Property Tax ("IMI") no. 2013 …, no. 2013 … and no. 2013 …, all dated 09.03.2014 and relating to the year 2013, (doc. no. 1 attached to the case file with the request for arbitral pronouncement); (ii) the reimbursement of all amounts that the Claimants paid based on the assessments in question and, further, (iii) the condemnation of the Tax and Customs Administration to pay compensatory interest for improper payment of tax obligations.

Pursuant to the terms provided in subsection a) of no. 2 of art. 6 and subsection b) of no. 1 of art. 11 of Decree-Law no. 10/2011, of 20 January, as amended by art. 228 of Law no. 66-B/2012, of 31 December, the Ethics Council of the Administrative Arbitration Centre (CAAD) appointed as arbitrator Nuno Pombo, and the parties, after being duly notified, did not manifest opposition to such appointment.

By order of 16.09.2014, the Tax and Customs Administration (hereinafter referred to as "Respondent") proceeded to appoint Mrs. Dr. D… and Dr. E… to intervene in the present arbitral proceedings, in the name and representation of the Respondent.

In accordance with the provision laid down in subsection c) of no. 1 of art. 11 of Decree-Law no. 10/2011, of 20 January, as amended by art. 228 of Law no. 66-B/2012, of 31 December, the arbitral tribunal was constituted on 04.11.2014.

On 18.11.2014, the top official of the Respondent's service was notified to, if willing, within the period of 30 days, submit a reply and request additional evidence production.

On 05.01.2015, the Respondent submitted its reply.

B – Position of the Claimants

The Claimants acquired, in November and December 2013, from F… – …, S.A. (the "F…") three autonomous fractions (one each) intended for tourist accommodation, which form an integral part of the urban property located in Plot ... of "G..." (the "G...").

The G… was duly licensed for tourist purposes and validly obtained the classification of 5-star tourist establishment, with the deed establishing tourist utility having been approved by Tourism of Portugal, I.P., on ….09.2010 and registered in the respective Registry under entry Ap. …/2010….

The deed establishing tourist utility permits the exemption from IMI, directly in accordance with the terms provided in art. 47 of the Tax Benefits Statute (the "EBF").

F… filed, dated 05.01.2011, a request to the Finance Service Chief of …, aiming at the exemption from IMI of the fractions that are part of G…, for a period of 7 years, which was granted by order of 10.01.2015.

The said exemption from IMI is objective and not subjective, therefore it does not pertain to F…, as owner of the fractions forming part of G…, but to any of its owners during the said period of 7 years, as is the case of the Claimants, since those fractions remain integrated in an undertaking to which the exemption was previously recognized.

None of the events provided for in art. 14 of Decree-Law no. 423/83, of 5 December (applicable by reference in no. 6 of art. 47 of the EBF) occurred, which constitute grounds for revocation of the tourist utility, which was not revoked, nor were the fractions acquired by the Claimants subtracted from the unitary operation of G…, since it integrates a plural ownership, being important to distinguish the operating entity, on the one hand, and the holder of the property right on the other, and no different utility or divergent purpose from the scope of the tourist operation conducted by the operating entity was assigned to each of the fractions in question as a result of the transfer made in favor of the Claimants.

The Claimants further consider that they have the right not only to the reimbursement of what they spent on improperly assessed taxes but also to the compensatory interest relating to them.

C – Position of the Respondent

The Respondent, in its reply, begins by expressing the understanding that the Claimants challenge the legality of the assessment acts, invoking the right to recognition of the exemption from IMI, then stating that the appreciation of the matter relating to the recognition of tax exemptions does not fall within the material jurisdiction of the Arbitral Tribunal.

The Respondent believes that, without prejudice to the exception raised, the Claimants acquired in 2013 autonomous fractions of an undertaking that was already installed and whose tourist utility was recognized in 2010, concluding that they acquired the respective fractions aiming not at the installation of a tourist undertaking (which in fact already existed) but at its operation.

For the Respondent, the provision in no. 4 of art. 47 of the EBF requires that the recognition of the exemption depend upon the presentation of a request by the taxpayers within a period that is naturally associated with the installation of the undertaking.

Furthermore, no. 6 (and not no. 5 as is erroneously stated) of art. 47 of the EBF explicitly refers to the provision of Decree-Law no. 423/83, of 5 December, and in this statute the emphasis of tax exemptions is on the purpose for which the fractions were acquired.

Thus, it appears evident that the legislator intended to confer an incentive on the acquisitions of real property with the objective of installing therein undertakings qualified as having tourist utility. There are, therefore in the understanding of the Respondent, two distinct procedures: that of installation and that of operation, and only the former justifies the exemption from IMI.

The Respondent further argues that admitting that the exemption from IMI duly petitioned by F… benefits the Claimants is equivalent to advocating the inter vivos transferability of a tax benefit, which is expressly prohibited by art. 15 of the EBF.

Finally, the Respondent contends that no compensatory interest is due since the challenged acts did not result in the obligation to pay a tax higher than that legally due.

D – Conclusion of the Report and Case Management

Having the Respondent raised the exception of lack of material jurisdiction of the Arbitral Tribunal, in honor of the principle of contradiction, the Claimants were invited to pronounce themselves on it, which they did, arguing its lack of merit, since the request for arbitral pronouncement expressly aims at the declaration of illegality of one of the three IMI assessments.

By order of 09.03.2015, the arbitral tribunal dispensed with the meeting provided for in art. 18 of the Legal Regime of Tax Arbitration (RJAT), since it was its understanding that the parties had brought to the proceedings all the necessary and sufficient factual elements for the rendering of the decision.

By order of 04.05.2015, the arbitral tribunal decided to issue an order extending the deadline for rendering the decision, estimating that it could take place until 18.06.2015.

The parties have legal personality and capacity and have standing in accordance with art. 4 and no. 2 of art. 10 of the RJAT, and art. 1 of Ordinance no. 112-A/2011, of 22 March.

The joinder of claimants is admissible in accordance with art. 144 of the Tax Code of Procedure and Process insofar as there is identity of the tax, of the factual and legal grounds invoked and the same is the competent body for the decision.

The joinder of claims made in the present request for arbitral pronouncement, in honor of the principle of procedural economy, is justified insofar as art. 3 of the RJAT, by expressly admitting the possibility of "joinder of claims even if relating to different acts", accommodates, without hermeneutical abuse, the appreciation of a claim that flows, in necessary terms, from the judgment that the arbitral tribunal arrives at regarding the validity of the assessments challenged.

The case does not suffer from any nullity. The Respondent raised the exception of lack of material jurisdiction of the arbitral tribunal, which, if judged well-founded, bars the appreciation of the merits of the case. Therefore, the arbitral tribunal must, first and foremost, appreciate it.

The exception of lack of material jurisdiction of the arbitral tribunal

As mentioned, the Respondent believes that the arbitral tribunal should refrain from knowing the claim since the cognizability of the matter relating to the recognition of tax exemptions does not fall within the scope of its jurisdiction.

In no. 1 of art. 2 of the RJAT, the jurisdiction of arbitral tribunals is set forth, and they may appreciate the following claims:

The declaration of illegality of assessment acts for taxes, self-assessment, withholding at source and payments on account; and

The declaration of illegality of acts fixing the taxable matter when it does not give rise to the assessment of any tax, acts determining the collectible matter and acts fixing property values.

The legislator intended that the rule of arbitrability of tax acts should be based on the assessment of taxes, leaving outside the jurisdiction of arbitral tribunals, among others, "the appreciation of the legality of administrative acts of total or partial rejection or revocation of exemptions or other tax benefits, when dependent on recognition by the Tax Administration"[2]. The same conclusion can be drawn from art. 2 of Ordinance no. 112-A/2011, of 22 March, a statute that sets forth the terms on which the tax and customs administration binds itself to arbitral jurisdiction.

What has just been stated does not amount to considering excluded from the scope of the jurisdiction of arbitral tribunals operating at the CAAD, as the Respondent suggests, the appreciation of the legality of acts assessing taxes, when such analysis also implies the formulation of a judgment on the applicability of any tax benefit[3]. In fact, it seems to this arbitral tribunal that appreciating the legality of an administrative act of rejection or revocation of exemptions or other tax benefits (appreciation which, as we said, is outside the jurisdiction of this arbitral tribunal) is not the same as judging the legality of an assessment act that disregards a tax benefit that the taxpayer understands to be applicable to it ope legis, as is the case in the present proceedings.

Therefore, this arbitral tribunal understands that it is materially competent to appreciate the claim.

Matter of Fact

3.1. Established Facts

The following facts are established:

Claimant A… acquired on 26.11.2013 the fraction AS and Claimants B… and C… acquired on 23.12.2013 the fractions AX and X, all intended for tourist accommodation, an integral part of the urban property located in Plot ... of G..., with the seller of all of them being F... (docs. nos. 2 and 3, attached with the request for arbitral pronouncement).

The G… was duly licensed for tourist purposes, with the deed establishing tourist utility having been approved by Tourism of Portugal, I.P., on ….09.2010 and registered in the respective Registry under entry Ap. …/2010… (agreement of the Parties).

By order no. …/2010, published in the Official Gazette, 2nd series, no. …, of … of … of 2010, the status of tourist utility was granted, on a definitive basis, to G…, pursuant to the provision in no. 1 of art. 2 and no. 3 of art. 7 of Decree-Law no. 423/83, of 5 December (doc. no. 6, attached with the request for arbitral pronouncement).

F… filed, dated 05.01.2011, a request to the Finance Service Chief of …, aiming at the exemption from IMI of the fractions forming part of G… for a period of 7 years, which was granted by order of 10.01.2011 (docs. nos. 4 and 5, attached with the request for arbitral pronouncement).

None of the events provided for in art. 14 of Decree-Law no. 423/83, of 5 December (applicable by reference in no. 6 of art. 47 of the EBF) occurred, which constitute grounds for revocation of the tourist utility, which was not revoked (agreement of the Parties).

The G…, including the fractions acquired by the Claimants, is managed and operated as a tourist facility by a single entity, F... (docs. nos. 2 and 3, attached with the request for arbitral pronouncement).

The fractions acquired by the Claimants were not subtracted from the unitary operation of G…, and no different utility or divergent purpose from the scope of the tourist operation conducted by the operating entity was assigned to any of them following or by virtue of the transfer made in favor of the Claimants (conclusion drawn by the arbitral tribunal in view of the elements brought to the case by the Parties).

Claimant A… paid on 29.04.2014, by way of IMI, the amount of € 211.88 (two hundred and eleven euros and eighty-eight cents), as per collection document no. 2013 ... (doc. no. 1, attached with the request for arbitral pronouncement).

Claimant B… paid on 29.04.2014, by way of IMI, the amount of € 207.84 (two hundred and seven euros and eighty-four cents), as per collection document no. 2013 ... (doc. no. 1, attached with the request for arbitral pronouncement).

Claimant C… paid on 29.04.2014, by way of IMI, the amount of € 207.84 (two hundred and seven euros and eighty-four cents), as per collection document no. 2013 ... (doc. no. 1, attached with the request for arbitral pronouncement).

3.2. Unestablished Facts

There are no facts relevant to the decision of the case that were not established.

Matter of Law

4.1. Questions to be Decided

It follows from what has been stated above that the questions to be appreciated are, in essence:

Whether, with respect to the autonomous fractions acquired by the Claimants in 2013, the exemption from IMI requested by F… to the Finance Service Chief of … and granted by such Chief by order of 10.01.2011, for a period of 7 years, remains in force after such transfer;

Whether, if the claim for declaration of illegality and consequent annulment of the challenged assessments is judged well-founded, the Claimants, within the scope of the present arbitral proceedings, may obtain the condemnation of the Respondent to pay compensatory interest.

4.2. The Tax Benefit Provided for in art. 47 of the EBF

4.2.1. Requirements of the Exemption and its Recognition

Under the heading "Properties Integrated in Undertakings to which Tourist Utility Has Been Attributed", art. 47 of the EBF reads as follows:

1 - Properties integrated in undertakings to which tourist utility has been attributed are exempted from municipal property tax for a period of seven years.

2 - Properties integrated in undertakings to which tourist utility has been attributed on a provisional basis benefit from the exemption provided in the preceding number, as from the date of the attribution of tourist utility, provided that the deadline set for the opening or reopening to the public of the undertaking or for the conclusion of the works has been observed.

3 - Urban properties allocated to residential tourism benefit from exemption from municipal property tax for a period of seven years counted from the conclusion of the respective works.

4 - In the cases provided for in this article, the exemption is recognized by the finance chief of the area where the property is located, upon a duly documented request, which must be submitted by the taxpayers within 60 days counted from the date of publication of the order attributing tourist utility.

5 - If the request is submitted beyond the period referred to in the preceding number, the exemption begins from the year immediately following, inclusive, to that of its submission, ceasing, however, in the year in which it would end, if the request had been submitted on time.

6 - In all respects not regulated in this article or in the Municipal Property Tax Code, the provision of Decree-Law no. 423/83, of 5 December, applies, with the necessary adaptations.

Note that no. 1 of this provision states that the exemption refers to "properties integrated in undertakings to which tourist utility has been attributed". To benefit from this exemption, it is not enough that the status of tourist utility be attributed to the undertaking in which the properties subject to tax are integrated. It is necessary that the same exemption be recognized by the finance chief of the area where the property is located, upon a duly documented request, which must be submitted by the taxpayers within 60 days counted from the date of publication of the order attributing tourist utility.

However, it must always be said that the recognition by the tax and customs administration does not depend on the appreciation of any question of merit relating to the undertaking to which tourist utility was attributed. For this reason, F… presented its request for exemption from IMI for the period of 7 years presented as the only necessary justification the "fact that on … December 2010, in the Official Gazette (…), was published order no. …/2010 of the Office of the State Secretary for Tourism, in which Tourist Utility is attributed on a definitive basis, for the period of 7 years, to the said Tourist Village", a request that was, merely three days after its submission, favorably granted.

Therefore, the recognition by the tax and customs administration of the exemption from IMI depends only on a simple request on the part of the taxpayer and the prior attribution to the undertaking in question, in accordance with the law, of tourist utility and its publication. Once these requirements are met, the competent finance chief must issue the respective order recognizing the exemption, inevitably granting the taxpayer's claim.

Note that the provision we have just cited also refers to a deadline for the submission of the said request. In fact, it states that it must be submitted by the taxpayers within 60 days counted from the date of publication of the order attributing tourist utility, without the late submission of the request resulting in any other consequences than the non-extension of the 7-year period, during which the taxpayer can rely on the exemption. The same is to say that the law sanctions the possibility of the taxpayer benefiting from the exemption from IMI for the maximum period of 7 years, counted from the date of publication of the order attributing tourist utility.

Thus, in the present case, having the order attributing tourist utility been published on 30.12.2010 and the request seeking the exemption from IMI been submitted on 07.01.2011, it was correct for the finance chief of … to recognize the same exemption for the period from 2010 to 2016, that is, 7 years.

4.2.2. Subsequent Transfer of Property Rights – Its Effects on the Exemption

What was said in the previous section is not subject to dispute. The Respondent does not challenge the exemption from IMI on each of the fractions up to the moment when F… alienates them to the Claimants. This understanding, although never formally stated by the Respondent in these exact terms, implies the recognition that only the entity that requests the exemption as a consequence of the attribution of tourist utility can benefit from it.

In our judgment, no literal element is found in art. 47 of the EBF that authorizes the reading that the Respondent makes of it. It is true that no. 4 of art. 47 of the EBF refers to the obligation to be submitted by the taxpayers, within a certain period, the request for exemption. However, it is clear that this "obligation" does not constitute a duty in the proper sense, but a burden. That is, taxpayers do not have the obligation to submit the request for exemption within 60 days from the publication of the order attributing tourist utility to the undertaking. Indeed, it is precisely because it is not an obligation that no. 5 of the same article provides on the legal consequences arising from the late submission of that request. It is not prejudiced as to its validity nor even as to its effectiveness, only seeing shortened in time the intended effects.

Thus, the Respondent is wrong when it seeks to make the request for exemption from IMI dependent, in indissoluble terms, therefore, on the installation of the tourist undertaking, concluding that only the entity that promoted its installation can request (and consequently benefit from) the exemption from IMI, reason why this arbitral tribunal understands that the exemption refers to the property, to each of the fractions that make up the undertaking to which tourist utility was attributed, and not to the promoter of the installation of the undertaking.

Moreover, no. 1 of art. 44 of the EBF, which opens the chapter on tax benefits relating to real property, establishes subjective exemptions (those pertaining only to certain entities and in that capacity) and objective exemptions (those that refer to certain properties, regardless of the respective owner). Already art. 46 of the EBF, for example, only appears to be objective, since it exempts from IMI properties intended as the owner's own and permanent residence. This tax benefit combines, in a unit that is teleologically inseparable, property and taxpayer, since it is granted to the taxpayer with respect to a property that constitutes his own and permanent residence.

This is not, as will be recognized, the legislative technique used in art. 47 of the EBF, since it exempts from IMI any properties integrated in undertakings to which tourist utility has been attributed, making no reference to the identity of the holders of the property rights in those same properties, for which reason the same is irrelevant.

Neither does the argument prevail that it would amount to admitting an illicit inter vivos transfer[4] of a tax benefit, the conclusion that the sale of autonomous fractions forming part of an undertaking to which tourist utility was attributed does not prejudice the production of effects of the exemption from IMI previously recognized. This is because, strictly speaking, what is involved is not the transfer of a tax benefit intuitu personae but rather the transfer of real property to which, for a determined period of time and in objective terms, an exemption from IMI is associated.

4.2.3. The Relevance of the Concept of Installation in art. 47 of the EBF

The Respondent insists on the idea, from which it seeks to draw implications, that in 2013, the year in which the Claimants acquired the fractions with which we have been dealing, the tourist undertaking was already installed.

Now, if we read art. 47 of the EBF correctly, we find in it no reference to that concept. Therefore, it is somewhat surprising that the Respondent's claim to see restricted the application of a tax benefit directly resulting from the law, and in terms moreover literally expressed, supporting it on the alleged relevance of a conceptual element not written: that of installation.

Even if we readily admit that in 2013 the undertaking was already installed, we do not see the reason that allows us to sustain the possibility (not to mention reasonableness) of terminating the production of effects of that benefit by virtue of a concept that is totally foreign to the literal elements to which the legislator wished to appeal.

The Respondent invokes, in its argumentative effort, the judgment unifying jurisprudence no. 3/2013, of 23 January, published in the Official Gazette of 4 March 2013. This important decision clarifies that "the concept of «installation», for purposes of the benefits to which no. 1 of art. 20 of Decree-Law no. 423/83, of 5 December, refers, refers to the acquisition of properties (or autonomous fractions) for the construction of tourist undertakings, after the respective urban planning operations have been duly licensed, aiming to benefit companies dedicated to the activity of promotion/creation of the same and not the acquirers of autonomous fractions in undertakings built/installed under a plural ownership regime, since this has to do with «operation» and not with «installation»".

It happens that the tax benefits to which no. 1 of art. 20 of Decree-Law no. 423/83, of 5 December, refers are those of Transfer Tax and Stamp Duty, and not IMI, for which the teachings of the judgment unifying jurisprudence cannot have the scope intended by the Respondent. To say that the legislator intended to confer an incentive on the acquisition of real property "with the objective of installing therein undertakings qualified as having tourist utility" is far from being an argument. Rather, it seems to be the thesis that requires demonstration. For, if that conclusion is not contestable in the field of Transfer Tax and Stamp Duty, it already seems abusive with respect to IMI.

Besides, it is not without significance the fact that the Claimants seek to benefit from the exemption from IMI, having accepted to pay the Transfer Tax and Stamp Duty due on the acquisition of the autonomous fractions, as can be seen from the public deeds that granted title to them and that are part of the case file.

Therefore, there is no identity of situations that permits the application to the present case of the discipline imposed by the said judgment, nor do we see that it can have any utility in the interpretation or filling of any gap in art. 47 of the EBF[5].

We do not, therefore, see reason to sustain the application of the provision in no. 1 of art. 20 of Decree-Law no. 423/83, of 5 December, by means of the subsidiary reference authorized by no. 6 of art. 47 of the EBF, since it is not demonstrated that the scope of application of that provision constitutes an aspect that is not regulated in the cited art. 47 or in the Municipal Property Tax Code.

4.3. Conclusion

In light of the foregoing, this arbitral tribunal understands that the acts assessing IMI now challenged are illegal, because they ignore the exemption from IMI that the properties benefit from until 2016.

4.4. Compensatory Interest

Subsection b) of no. 1 of art. 24 of the RJAT provides that "the arbitral decision on the merits of the claim to which no appeal or challenge lies binds the tax administration from the end of the deadline provided for appeal or challenge, and it must, in the exact terms of the success of the arbitral decision in favor of the taxpayer and until the end of the deadline provided for the voluntary execution of sentences of tax courts, restore the situation that would have existed if the tax act that is the object of the arbitral decision had not been performed, adopting the acts and operations necessary for that purpose".

It is not ignored that the legislative authorization granted to the Government by art. 124 of Law no. 3-B/2010, of 28 April, on the basis of which the RJAT was approved, determines that the tax arbitration process constitutes an alternative procedural means to the process of judicial challenge and to the action for the recognition of a right or legitimate interest in tax matters. Although subsections a) and b) of no. 1 of art. 2 of the RJAT base the jurisdiction of arbitral tribunals on "declarations of illegality", it seems reasonable the understanding that its jurisdiction includes the powers that in judicial challenge proceedings are attributed to tax courts, it being clear that in judicial challenge proceedings, in addition to the annulment of tax acts, claims for indemnification can be appreciated, namely those relating to compensatory interest.

Indeed, the principle of cognizability of claims for indemnification, in administrative claim or in judicial proceedings, is justified whenever the damage that is sought to be recovered results from a fact imputable to the tax and customs administration. Manifestations of that principle are found in no. 1 of art. 43 of the LGT and in art. 61 of the CPPT.

The right to the perception of compensatory interest by the Claimants depends, therefore, on the verification of the following requirements: a) error imputable to the administration; b) that from the said error results the payment of tax in an amount higher than that legally due; c) that the error of the administration be analyzed in administrative claim or in judicial challenge proceedings.

In the present case, the error imputable to the administration exists and resides in the fact that the Claimants were required to pay a tax, IMI, which was not due to them by virtue of the exemption that the properties benefited from. From the analysis of the administrative procedure, it is verified that the Respondent could and should have refrained from performing the assessment acts now challenged and such error merits censure in accordance with the law, in particular in light of what is provided in art. 43 and art. 100 of the LGT. Consequently, this arbitral tribunal understands that the Claimants have the right to compensatory interest.

Decision

In the terms and with the grounds set forth, the arbitral tribunal decides:

To grant the request for arbitral pronouncement and consequently annul the assessment acts no. 2013 …, no. 2013 … and no. 2013 …, all dated 09.03.2014;

To condemn the Respondent to reimburse the Claimants for the amounts paid by them because unlawfully demanded, in the amount of € 211.88, € 207.84 and € 207.84;

To grant the request for condemnation of the Respondent to pay compensatory interest, at the legal rate, counted from the date of the improper payment until its complete reimbursement.

Value of the Case

In accordance with the provision in no. 2 of art. 315 of the CPC, in subsection a) of no. 1 of art. 97-A of the CPPT and also no. 2 of art. 3 of the Costs Regulation in Tax Arbitration Proceedings, the value of the case is fixed at € 627.56 (six hundred and twenty-seven euros and fifty-six cents).

Costs

For the purposes of the provision in no. 2 of art. 12 and no. 4 of art. 22 of the RJAT and no. 4 of art. 4 of the Costs Regulation in Tax Arbitration Proceedings, the amount of costs is fixed at € 306.00 (three hundred and six euros), in accordance with Table I attached to the said Regulation, to be fully borne by the Respondent.

Lisbon, 18 June 2015

The Arbitrator

(Nuno Pombo)

[1] Text prepared by computer in accordance with the provision of art. 131, no. 5, of the CPC, applicable by reference in art. 29 of the RJAT.

[2] JORGE LOPES DE SOUSA, Commentary on the Legal Regime of Tax Arbitration, in Guide to Tax Arbitration, Almedina, 2013, p. 105.

[3] There is indeed abundant arbitral jurisprudence that reviews assessment acts under provisions establishing tax benefits.

[4] See art. 15 of the EBF.

[5] See art. 10 of the EBF.

Frequently Asked Questions

Automatically Created

What is the IMI tax exemption for properties with tourist utility classification under Article 47 of the EBF?
Under Article 47 of the Tax Benefits Statute (EBF), properties with recognized tourist utility can benefit from IMI exemption for up to 7 years. However, this exemption requires a formal request by the taxpayer and is specifically designed to incentivize the installation of new tourist undertakings. According to Portuguese tax authorities, the exemption applies to the acquisition and installation phase of tourist establishments, not merely to their operation. The property must obtain tourist utility classification from Turismo de Portugal, and the exemption must be formally requested from the local Finance Service Chief. Critically, the transferability of this exemption to subsequent property owners remains contested, with tax authorities arguing that Article 15 EBF prohibits inter vivos transfer of tax benefits, making the exemption personal to the original applicant rather than attached to the property itself.
How does obtaining a tourist utility title from Turismo de Portugal affect IMI liability?
Obtaining a tourist utility title from Turismo de Portugal is a necessary but not sufficient condition for IMI exemption. The tourist utility classification, granted under Decree-Law 423/83, confirms that the property meets standards for tourist accommodation and operates within the legal framework for tourism establishments. However, to secure IMI exemption under Article 47 EBF, property owners must separately request the tax benefit from the Finance Service Chief, typically within a timeframe associated with the installation of the undertaking. The tourist utility title validates the property's tourism purpose and qualification level (such as 5-star classification), but the IMI exemption is a distinct tax benefit requiring specific application, approval, and compliance with statutory conditions including the prohibition on transferring the benefit to subsequent purchasers without proper authorization.
Can foreign property owners in Portugal claim IMI exemption for tourist accommodation units?
Foreign property owners, including non-residents from countries like China, can potentially claim IMI exemption for tourist accommodation units in Portugal, but face significant legal challenges regarding benefit transferability. While Portuguese tax law does not discriminate based on nationality or residence for property ownership, the key issue is whether the exemption transfers with the property or remains with the original applicant. In Process 649/2014-T, three Chinese nationals who purchased units in an existing tourist complex discovered that the Tax Authority considers IMI exemptions under Article 47 EBF to be non-transferable under Article 15 EBF. Tax authorities distinguish between acquiring property to install a new tourist undertaking (which qualifies for exemption) versus purchasing already-operational units (which may not). Foreign investors should therefore apply for their own IMI exemption when acquiring tourist properties, rather than assuming any existing exemption automatically transfers, and must demonstrate they are installing or establishing a tourist undertaking rather than simply operating an existing one.
What is the CAAD arbitration procedure for challenging IMI tax assessments in Portugal?
The CAAD (Centro de Arbitragem Administrativa) arbitration procedure for challenging IMI assessments begins with filing a request for constitution of an arbitral tribunal, as governed by Decree-Law 10/2011 and the Legal Regime of Tax Arbitration (RJAT). The taxpayer submits a written request specifying the contested assessment acts and legal grounds. CAAD's Ethics Council appoints an arbitrator, and parties can object to the appointment. Once constituted, the tribunal notifies the Tax Authority to submit a reply within 30 days. The procedure follows principles of contradiction, allowing both parties to present arguments and evidence. The tribunal may dispense with hearings if sufficient elements exist for decision-making. Importantly, the Tax Authority may raise preliminary exceptions, such as questioning CAAD's material jurisdiction over matters involving recognition of tax exemptions versus challenging assessment acts. The tribunal must render decisions within statutory deadlines, with possible extensions. This arbitration mechanism provides an alternative to judicial courts for resolving tax disputes, offering potentially faster resolution for IMI and other tax matters.
Does a 5-star tourist classification automatically grant IMI exemption under Portuguese tax law?
A 5-star tourist classification alone does not automatically grant IMI exemption under Portuguese tax law. While the 5-star rating indicates the quality level of the tourist establishment as assessed by Turismo de Portugal, obtaining IMI exemption under Article 47 EBF requires a separate administrative procedure. Property owners must affirmatively request the tax exemption from the competent Finance Service Chief, demonstrating compliance with specific legal requirements. The exemption is designed to incentivize investment in installing new tourist undertakings, not merely to reward existing high-quality operations. Furthermore, tax authorities interpret Article 47 EBF as requiring that properties be acquired for the purpose of installing tourist facilities, emphasizing the installation phase over operational phase. Therefore, even properties with tourist utility classification and 5-star ratings remain subject to normal IMI taxation unless the property owner successfully applies for and receives formal approval of the exemption, and that approval remains valid and non-revoked under the conditions specified in applicable legislation.