Process: 653/2016-T

Date: April 25, 2017

Tax Type: IMT Selo

Source: Original CAAD Decision

Summary

In CAAD Decision 653/2016-T, a real estate investment fund (FIIAH) challenged IMT and Stamp Tax assessments totaling €2,710.45 on constitutional grounds, arguing that Article 236 of Law 83-C/2013 violated the principle of non-retroactivity of tax law under Article 103(3) of the Portuguese Constitution. The fund had acquired property in December 2013 under the exemption regime established by Law 64-A/2008, which granted FIIAH funds full IMT and Stamp Tax exemptions on residential property acquisitions. However, the transitional provision in Article 236 retroactively required payment of these taxes on previously exempted transactions. The Tax Authority raised a preliminary objection regarding CAAD's material competence to assess abstract constitutionality, which the tribunal rejected, clarifying that its jurisdiction extends to evaluating the constitutional conformity of specific tax acts rather than conducting abstract constitutional review. The case raises fundamental questions about the temporal limits of tax legislation, the protection of legitimate expectations in structured investment vehicles, and the scope of special tax regimes for residential rental investment funds. The tribunal's analysis centered on whether retroactive elimination of tax benefits violates constitutional protections against retrospective taxation, a principle deeply embedded in Portuguese tax law that safeguards taxpayer security and predictability in fiscal planning.

Full Decision

ARBITRATION DECISION

I. REPORT

1. A…, S.A., with registered office at …, n.°…—…, …—…, Lisbon, with tax identification number …, in its capacity as managing company of the real estate investment fund B…— CLOSED REAL ESTATE INVESTMENT FUND FOR RESIDENTIAL LEASING, registered with the Securities Market Commission, with tax identification number …, requested the establishment of an arbitral tribunal in tax matters with a view to the declaration of nullity or, should that not be the case, the annulment of the assessments of Municipal Tax on Onerous Transfers of Real Property (IMT) and Stamp Duty (IS) relating to the acquisition, for valuable consideration, of the autonomous fraction designated by the letter "L", of the urban property registered in the respective property register of the parish of …, municipality of ….

The assessments in question, in the amounts of € 1,686.09 and € 1,024.36, relating to IMT and IS, respectively, were made on 10-08-2016 following a request duly submitted by the Claimant on behalf of the taxpayer, on the basis of the provision in number 16 of article 8 of the Special Regime of Real Estate Investment Funds for Residential Leasing (FIIAH) approved by Law No. 64-A/2008 of 31/12, applicable by virtue of article 236 of Law 83-C/2013, of 31/12.

As a consequence of the declaration of illegality of the aforementioned acts, the Claimant requests that their annulment be determined with the consequent reimbursement of the amount paid, plus the respective compensatory interest calculated in accordance with legal terms.

2. As the basis for its request, the Claimant alleges, in summary, that the questioned assessments are affected by abstract illegality, inasmuch as they were made on the basis of an unconstitutional provision – article 236 of Law No. 83-C/2013, of 31/12 (Transitional Provision within the Framework of the Special Regime Applicable to FIIAH and SIIAH) - by violation of the principle of non-retroactivity of tax law, enshrined in article 103 (Tax System), no. 3, of the Constitution of the Portuguese Republic (CRP).

3. For its part, the Respondent - Tax and Customs Authority (AT) - in response to the allegation, argues for the dismissal of the request and, consequently, for the maintenance of the questioned assessment acts, on the basis that this is not a matter of retroactivity of the law but merely the application of the special regime applicable to FIIAH and SIIAH, in its original formulation.

4. The request for establishment of the arbitral tribunal, submitted on 31-10-2016, was accepted by the President of CAAD and automatically notified to the Respondent on 18-11-2016.

5. Pursuant to the provision in paragraph a) of no. 2 of article 6 and paragraph b) of no. 1 of article 11 of Decree-Law No. 10/2011, of 20/01, with the wording introduced by article 228 of Law No. 66-B/2012, of 31/12, the Deontological Council designated the undersigned as arbitrator of the single arbitral tribunal, who communicated acceptance of the appointment within the applicable period, and notified the parties of this appointment on 04-01-2017.

6. Having been duly notified of this appointment, the parties did not manifest a willingness to refuse the designation of the arbitrator, pursuant to the combined provisions of article 11, no. 1, paragraphs a) and b) of the RJAT and articles 6 and 7 of the Deontological Code.

7. Thus, in accordance with the provision in paragraph c) of no. 1 of article 11 of the RJAT, with the wording introduced by article 228 of Law No. 66-B/2012, of 31/12, the single arbitral tribunal was constituted on 19-01-2017.

8. Regularly constituted, the arbitral tribunal has material jurisdiction, in view of the provision in articles 2, no. 1, paragraph a), of the RJAT.

9. The parties have legal personality and capacity and have standing (arts. 4 and 10, no. 2, of the RJAT, and art. 1 of Ordinance No. 112-A/2011, of 22/03).

10. Having regard to the knowledge derived from the procedural documents submitted by the parties, which is considered sufficient for the decision, the Court decided to dispense with the hearing referred to in article 18 of the RJAT.

11. The process is not affected by nullities, although the Respondent raised an objection regarding the "material incompetence of the arbitral tribunal to assess the abstract illegality of the assessments".

II. FACTS

12. With relevance for the assessment of the question raised, the following factual elements are highlighted which, based on the elements contained in this process, are considered proven:

12.1. The Fund "B…- Closed Real Estate Investment Fund for Residential Leasing", represented by the Claimant, was, at the date of the assessments at issue, owner of the urban property, registered under article…, fraction "L", in the urban property register of the parish of …, in the municipality of ….

12.2. The said property was acquired on 18-12-2013, and the acquisition benefited from exemption from IMT and IS under no. 7, paragraph a) and no. 8 of article 8 of the legal regime of FIIAH, approved by Law No. 64-A/2008, of 31/12.

12.3. With regard to the transfer of the property in question, a request was made for the assessment of IMT and IS relating to that acquisition, in accordance with the provisions of no. 16 of article 8 of the Special Regime applicable to FIIAH, approved by Law No. 64-A/2008, of 31/12, a provision amended by Law No. 83-C/2013, of 31/12, combined with the Transitional Regime contained in article 236 of that Law.

12.4. On 10-08-2016, the following assessments were made:

- IMT, no…, in the amount of € 1,686.09:

- Stamp Duty, no…, in the amount of € 1,024.36.

12.5. The tax assessed in the said assessments was paid on 11 August 2016.

13. There are no facts relevant to the decision that have not been proven.

III. LAW

Preliminary Matter: Material Incompetence of the Arbitral Tribunal

14. The Respondent, in its response, raises the question of material incompetence of the arbitral tribunal to assess the abstract constitutionality of the provisions, and is therefore incompetent to declare the constitutionality or unconstitutionality of the provision of article 236 of Law No. 83-C/2013, of 31/12. Consequently, the Respondent argues, such incompetence constitutes a dilatory objection that prevents the continuation of the process, resulting therefrom the absolution from the instance regarding the claim at issue, in accordance with the combined provisions of articles 278, no. 1, paragraph a) and 576, nos. 1 and 2 of the Code of Civil Procedure, applicable by virtue of article 29, no. 1, paragraph e) of the RJAT.

15. On this matter, it seems possible to clearly extract from the request formulated by the Claimant that its object is the assessments of IMT and IS, specifically identified, formulating a claim to the effect that the tribunal declare their nullity or annulment on the basis of the unconstitutionality of the provision that supports them by violation of the constitutional principle of non-retroactivity of tax law.

16. Although in the introductory part of the petition the question is stated in terms that suggest that the claim is aimed at the assessment and declaration of unconstitutionality of the provision that establishes a transitional regime applicable to the special regime of FIIAH, the entire exposition and the specific request finally formulated go, therefore, unequivocally in the sense stated above.

17. Since abstract constitutional review of the provision is not in question - which, moreover, would not fall within the scope of the jurisdiction of this tribunal - but only the assessment of the conformity with constitutional law of the specific and duly identified tax acts, the objection of incompetence raised by the Respondent is considered unfounded.

Position of the Parties

a) Position of the Claimant

18. As previously mentioned, the question placed before the Arbitral Tribunal is limited to the Claimant's claim regarding the assessment of the legality of the IMT and IS assessments, identified above, made on the basis of a request for assessment formulated under no. 16 of article 8 of the Special Regime of FIIAH and no. 2 of article 236 of Law No. 83-C/2013, of 31/12.

19. In support of its claim, the Claimant, in summary, alleges that:

19.1. Law No. 64-A/2008, of 31/12 - State Budget for 2009 - which approved the Special Regime applicable to Real Estate Investment Funds for Residential Leasing (FIIAH) and Real Estate Investment Companies for Residential Leasing (SIIAH) established in article 8 the tax regime applicable to FIIAH with regard to IMT, having defined in number 7 of the cited article 8 that:

"The following are exempt from IMT:

a) Acquisitions of urban properties or autonomous fractions of urban properties intended exclusively for leasing for permanent residence, by the investment funds referred to in no. 1;

b) Acquisitions of urban properties or autonomous fractions of urban properties intended for permanent and own residence, as a result of the exercise of the purchase option referred to in no. 3 of article 5 by the tenants of the properties that form part of the assets of the investment funds referred to in no. 1."

19.2. Law No. 83-C/2013, of 31/12 - State Budget for 2014 - amended article 8 of the Tax Regime of FIIAH, adding to it numbers 14 to 16, with the following text:

"14 - For the purposes of the provision in nos. 6 to 8, urban properties are considered to be intended for leasing for permanent residence whenever they are subject to a lease agreement for permanent residence within three years from the moment they became part of the fund's assets, and the taxpayer must communicate and provide proof to the AT of the respective effective leasing, within 30 days following the end of the said period.

15 - When the properties have not been subject to a lease agreement within the three-year period provided for in the previous number, the exemptions provided for in nos. 6 to 8 cease to have effect, and in that case the taxpayer must request the AT, within 30 days following the end of the said period, the assessment of the respective tax.

16 - In case the properties are transferred, with the exception of cases provided for in article 5, or in case the FIIAH is subject to liquidation, before the period provided for in no. 14 has elapsed, the taxpayer must likewise request the AT, before the transfer of the property or the liquidation of the FIIAH, the assessment of the tax due in accordance with the previous number."

19.3. Law No. 83-C/2013, of 31/12, also enshrined in its article 236 the following transitional regime:

"1 - The provision in nos. 14 to 16 of article 8 of the special regime applicable to FIIAH and SIIAH, approved by articles 102 to 104 of Law No. 64-A/2008, of 31 December, applies to properties that have been acquired by FIIAH from 1 January 2014 onwards.

2 - Without prejudice to the provision in the previous number, the provision in nos. 14 to 16 of article 8 of the special regime applicable to FIIAH and SIIAH, approved by articles 102 to 104 of Law No. 64-A/2008, of 31 December, also applies to properties that have been acquired by FIIAH before 1 January 2014, counting, in those cases, the three-year period provided for in no. 14 from 1 January 2014."

19.4. On the basis exclusively of the provisions cited above, in particular those resulting from the amendments made to the Tax Regime of FIIAH, the Claimant here requested from the Tax and Customs Authority (AT) the assessment of IMT and IS that are the subject of this request for arbitral determination.

19.5. The questioned assessments concern an urban property which, at the date of entry into force of Law No. 83-C/2013, of 31/12, formed part of the assets of the Real Estate Investment Fund B…- Closed Real Estate Investment Fund for Residential Leasing.

19.6. Considering the nature of both IMT and IS as single-occurrence taxes, and that the tax fact, located in time, is exhausted in the act of acquisition of the property, the Claimant argues that the fact that it was recognized to have exemption from the said taxes at the time of the said acquisition constitutes an acquired right crystallized in its legal sphere at the date on which the amendments to the Special Regime of FIIAH occurred.

19.7. Furthermore, in the Claimant's view, in accordance with the regime in force at the date of acquisition, the said exemptions were not subject to a resolutory condition, being manifest that "Not being, however, legally provided for, at the moment of recognition of the exemption, any facts or circumstances upon which the lapse of the recognized exemption depended, it is manifest that the subsequent imposition of those facts or circumstances to exemptions crystallized in the tax legal order of the Claimant is affected by unconstitutionality by violation of the principle of non-retroactivity of tax law, enshrined in article 103 (Tax System), no. 3, of the Constitution of the Portuguese Republic."

19.8. Therefore, concludes the Claimant, "Article 236 (Transitional Provision within the Framework of the Special Regime Applicable to FIIAH and SIIAH) of Law No. 83-C/2013, of 31 December (State Budget for 2014), by extending the application of the current Tax Regime of FIIAH ("to properties that have been acquired by FIIAH before 1 January 2014, counting, in those cases, the 3-year period provided for in no. 14 from 1 January 2014") - is violating directly and unequivocally the principle of non-retroactivity of tax law constitutionally enshrined. Indeed, the extension enshrined therein constitutes a new regime for the lapse of the exemptions provided for in numbers 7, paragraph a) and 8 of article 8 (Tax Regime) and not a mere specification of a criterion previously provided for."

19.9. In reinforcement of the position it affirms, the Claimant submits to the record a legal opinion.

b) Position of the Respondent

20. After detailing the tax regime applicable to FIIAH, the Respondent, referring to the case at hand, emphasizes that:

20.1. At the date of creation of the said tax regime, established by Law No. 64-A/2008, of 31/12, the exemptions in question, whether in IMT or in IS, respectively required:

(i) that the acquisition of the properties was intended exclusively for "leasing for permanent residence" and,

(ii) that the transfer had as its object "properties intended for permanent residence that occurs by virtue of the conversion of the right of ownership of these properties into a right of leasing thereon, as well as with the exercise of the purchase option provided for in no. 3 of article 5".

20.2. Taxpayers who wished to benefit from the said exemptions have, since the beginning of the tax regime applicable to FIIAH, always had to comply with the requirement that such properties be intended exclusively for leasing for permanent residence.

20.3. Therefore, the Claimant is mistaken when it affirms that the exemptions at issue were not conditioned by any facts or circumstances and, consequently, the argument it constructs starting from such erroneous assumption is likewise affected by error.

20.4. The new wording introduced by Law No. 83-C/2013, of 31/12, in favor of legal certainty and the principle of protection of reliance, and in the spirit of the legislator when creating the regime, merely specified the criterion already required, stipulating "that urban properties are intended for leasing for permanent residence whenever they are subject to a lease agreement for permanent residence within three years from the moment they became part of the fund's assets".

20.5. On the other hand, the Respondent argues, "it should be noted that the cessation of a tax benefit may always take place, for example, if it is found, in a specific case, by means of inspection, that the respective requirements are not met (see art. 7 no. 1 of the TBF). Given that, as it follows from article 14, no. 1, of the TBF, "the extinction of tax benefits has as a consequence the automatic restoration of standard taxation". To which is added, further, the provision of article 14, no. 2, of the TBF in which it is determined that "when the tax benefit concerns the acquisition of goods intended for the direct realization of the purposes of the acquirers, it ceases to have effect if those goods are transferred or given another purpose without authorization of the Minister of Finance, without prejudice to the remaining sanctions or different regimes established by law".

20.6. Therefore, concludes the Respondent, "(...) it is manifest that, from the beginning of the regime, the tax benefits at issue applicable to FIIAH have always depended on the allocation of the properties to leasing for permanent residence, a legal requirement that the AT, within the scope of its inspection powers, could always verify, in order to conclude as to the maintenance of the benefit or, rather, the restoration of the standard taxation system.

Thus, given that the transfer of the properties is in question without the allocation of the same to leasing for permanent residence, this would always determine the lapse of the exemption, under article 14, no. 2, of the TBF, and article 8, no. 16 of the regime merely specifies an anti-abuse measure, establishing that properties that do not remain in the portfolio with allocation exclusively to residential leasing were not acquired with that purpose."

On the Merits of the Request

21. From the facts given as proven and from the positions of the parties summarized above, it follows that it is essentially a matter of whether the assessments of IMT and IS impugned are affected by illegality, because they were made under the provisions of no. 16 of article 8 of the Special Regime of FIIAH and no. 2 of article 236 of Law No. 83-C/2013, of 31/12, which the Claimant considers to be unconstitutional by violation of the provision in article 103 of the CRP.

22. It is important, therefore, to emphasize that the Special Regime Applicable to FIIAH and SIIAH, approved by Law No. 64-A/2008, of 31/12, provides, in no. 7 of article 8, that the following are exempt from IMT "acquisitions of urban properties or autonomous fractions of urban properties intended exclusively for leasing for permanent residence" by the said Investment Funds, as well as "acquisitions of urban properties or autonomous fractions of urban properties intended for permanent and own residence, as a result of the exercise of the purchase option referred to in no. 3 of article 5 by the tenants of the properties that form part of the assets of the investment funds...".

23. According to no. 8 of the same article, the following benefit from IS exemption "all acts performed, provided they are connected with the transfer of urban properties intended for permanent residence that occurs by virtue of the conversion of the right of ownership of these properties into a right of leasing thereon, as well as with the exercise of the purchase option provided for in no. 3 of article 5".

24. By means of Law No. 83-C/2013, of 31/12, the wording of the said article 8 was amended, and numbers 14 to 16 were added to it, with the following content:

"14 - For the purposes of the provision in nos. 6 to 8 of the said article 8, urban properties are considered to be intended for leasing for permanent residence "whenever they are subject to a lease agreement for permanent residence within three years from the moment they became part of the fund's assets, and the taxpayer must communicate and provide proof to the AT of the respective effective leasing, within 30 days following the end of the said period.

15 - When the properties have not been subject to a lease agreement within the three-year period provided for in the previous number, the exemptions provided for in nos. 6 to 8 cease to have effect, and in that case the taxpayer must request the AT, within 30 days following the end of the said period, the assessment of the respective tax.

16 - In case the properties are transferred, with the exception of cases provided for in article 5, or in case the FIIAH is subject to liquidation, before the period provided for in no. 14 has elapsed, the taxpayer must likewise request the AT, before the transfer of the property or the liquidation of the FIIAH, the assessment of the tax due in accordance with the previous number".

25. Article 236 of the same Law further established the following transitional provision:

"1 - The provision in nos. 14 to 16 of article 8 of the special regime applicable to FIIAH and SIIAH, approved by articles 102 to 104 of Law No. 64-A/2008, of 31 December, applies to properties that have been acquired by FIIAH from 1 January 2014 onwards.

2 - Without prejudice to the provision in the previous number, the provision in nos. 14 to 16 of article 8 of the special regime applicable to FIIAH and SIIAH, approved by articles 102 to 104 of Law No. 64-A/2008, of 31 December, also applies to properties that have been acquired by FIIAH before 1 January 2014, counting, in those cases, the three-year period provided for in no. 14 from 1 January 2014".

26. It is therefore, essentially, the content of the cited provisions, under which the questioned assessments were requested and made, that forms the basis for the request for declaration of illegality of the same, on the basis of violation of the constitutional principle of non-retroactivity of tax law.

27. This matter has been the subject of numerous decisions of the Arbitral Tribunal issued on situations entirely identical to that of the present process, with emphasis, among others that go in the same sense [i], the conclusions formulated in Proc. No. 689/2015-T:

"(...) the obligation to allocate the property to residential leasing is not a requirement of the amendments introduced by articles 235 and 236 of 83-C/2013, of 31 December, but rather a requirement of the tax regime of FIIAH. It is the natural consequence, as the Respondent rightly alleges, of the motivations that led to the creation of a special temporary regime applicable to these Funds, linked to the economic crisis and the consequent increased difficulty of individuals and families in meeting the installment payments of mutual contracts concluded for the acquisition of permanent own residence, the regime thus seeking to meet situations of difficulty and encourage leasing for permanent own residence.

The 2014 State Budget indeed establishes new rules for the exemption: if the allocation to leasing for permanent residence does not occur within the 3-year period following the entry of the property into the Fund and, furthermore if the FIIAH is subject to liquidation, before that period has elapsed, the acquirer must request the assessment of the IMT that was not assessed.

This was not, however, the reason why the Claimant proceeded to the declarations that gave rise to the assessments at issue, which is clearly apparent from the analysis of the documents attached, despite the Claimant's argument suggesting otherwise.

The IMT assessments made with respect to the properties described above were not based on their retention in the fund for a period equal to or greater than 3 years without allocation to leasing for permanent residence.

The assessments at issue, moreover, as appears from the assessment notes attached to the file, were based on the fact, in the words of the Claimant itself, that the properties had been given "different purpose from that on which the benefit was based", "the exemption lapsing".

The fact that the transfer of the property causes the exemption to lapse is not, as will be explained below, a new fact, resulting from the amendment made by the 2014 State Budget. What will be new, at most, is the obligation of the acquirer to request the assessment of the taxes that were not assessed before the transfer. A provision that is not only merely procedural, but is not even in question in these proceedings, having in mind that this is precisely what the Claimant did and the consequence would always be, as we shall see results from the Tax Benefits Statute, that the taxes would be assessed officially by the Treasury (plus the interest and sanctions provided for by law), once the transfer was ascertained.

It therefore seems to us clearly evident that the question sub judice is not connected with the possible unconstitutionality, by violation of the prohibition on retroactivity of tax law, of the numbers added to article 8 by the 2014 State Budget.

In fact, the transfer of the property in question by the Claimant determines, as the Claimant itself recognized in the declarations for assessment of IMT and IS, the lapse of the exemption, because it was given by the Claimant a different purpose from that which had determined the granting of the benefit.

For compliance with paragraph a) of no. 7 of article 8, it is not enough to have a stated intention at the time of property acquisition, but an effective allocation to leasing for permanent residence.

It is not therefore true, as the Claimant affirms, that the facts or circumstances upon which the respective lapse of exemption depended were not already legally provided for, at the moment of recognition of the exemption, at least with regard to the circumstances that actually occurred: the transfer of the property.

In fact, the granting of a benefit already depended – and always depends – on the actual verification of its respective requirements, in accordance with article 12 of the TBF (article 11, in the wording of the TBF as in force prior to its republication by Decree-Law No. 108/2008, of 26/06).

The fact that the Claimant proceeded to transfer the property which, upon acquiring it, it declared it would allocate for the purpose that allowed it to be recognized – as it was – the exemption from IMT and IS, would always determine, even if the added number 16 did not expressly provide for it, the lapse of such exemptions, by effect of the provision in article 12 and in no. 3 of article 14 of the Tax Benefits Statute (former 12, no. 3, in the wording of the TBF as in force prior to its republication by Decree-Law No. 108/2008, of 26/06), according to which "When the tax benefit concerns the acquisition of goods intended for the direct realization of the purposes of the acquirers, it ceases to have effect if those goods are transferred or given another purpose without authorization of the Minister of Finance, without prejudice to the remaining sanctions or different regimes established by law.".

The Claimant neither alleged nor, with even greater reason, demonstrated having obtained the authorization provided for therein, or any other circumstance that would prevent the granted exemptions from ceasing to have effect as a consequence of the transfer.

It is for that reason that, as we have already stated above, we understand that the question of the alleged unconstitutionality of the provisions added does not arise in the case at hand, insofar as, in the part corresponding to the transfer of the property, no. 16 of article 8 of the Legal Regime of FIIAH merely reiterates what already resulted from the provision in the Tax Benefits Statute.

Which, moreover, is well understood, given the ratio of the granting of tax benefits.

The ratio for the attribution of the tax benefit in IMT and IS to FIIAH is clearly its allocation to leasing for permanent residence— "Acquisitions of urban properties or autonomous fractions of urban properties intended exclusively for leasing for permanent residence, by the investment funds..." – and therefore the consequence of giving it a different purpose is that the exemption could not have been granted, it being necessary to restore legality, by assessing the taxes which, were it not for the declaration of intent made at the time of acquisition, would have had to be assessed.

Which the Claimant recognized, all the more so as this is precisely what appears in the declarations made by the Claimant itself for assessment of IMT and IS.

In conclusion, the transfer of the property would always determine the lapse of the exemption by application of the provision in no. 3 of article 14 of the TBF, there being therefore, in the situation sub judice, no question of any retroactive application of a provision that introduces a new regime for the lapse of exemptions, nor is there any injury to the expectations of the Claimant or worsening of its tax position, and therefore we understand that the assessments of IMT and Stamp Duty at issue are legal.

The analysis of the question raised by the Claimant regarding the alleged retroactivity of the regime provided for by article 236 of the State Budget Law for 2014 is therefore prejudiced, inasmuch as, as demonstrated above, the conditions that gave rise to the tax assessments at issue are in no way related to the amendments made by the said article, being related only to the transfer of the property and the consequent allocation to a purpose different from that for which the exemptions from IMT and Stamp Duty were granted.

28. Adhering, without reservation, to the conclusions and reasoning expressed in the Arbitral Decision transcribed above, it is therefore considered that the request for arbitral determination is unfounded, deciding in favor of the legality of the assessments that are its object.

29. Indeed, in the specific situation analyzed in the present process, it is found that the property to which the said assessments refer was transferred in 2016, thus being given an allocation different from that which justified the attribution of the tax benefits relating to its acquisition.

30. Having decided in favor of the legality of the impugned assessments, the assessment of the request for condemnation to compensatory interest is prejudiced.

IV. DECISION

In these terms, and with the grounds set out, the Arbitral Tribunal decides:

a) To dismiss the objection of material incompetence of the Arbitral Tribunal;

b) To dismiss the request for annulment of the IMT and IS assessments that are the subject of the present process;

c) To condemn the Claimant to the costs of the process.

Value of the process: € 2,710.45

Costs: Under the provision of article 22, no. 4, of the RJAT, and in accordance with Table I attached to the Regulation of Costs in Tax Arbitration Proceedings, I set the amount of costs at € 612.00, to be borne by the Claimant.

Lisbon, 25 April 2017,

The Arbitrator, Álvaro Caneira.

[i] See, inter alia, the Arbitral Decisions issued in Procs. 398/2015-T, 684/2015-T, 688/2015-T, 689/2015-T, 690/2015-T, 691/2015-T, 694/2015-T, 705/2015-T, 706/2015-T, 707/2015-T, 708/2015-T, 709/2015-T, 710/2015-T, 717/2015-T, 729/2015-T, 735/2015-T, 737/2015-T, 56/2016-T, 57/2016-T, 61/2016-T, 63/2016-T, 125/2016-T, 128/2016-T, 165/2016-T and 419/2016-T.

Frequently Asked Questions

Automatically Created

Can FIIAH real estate investment funds claim IMT and Stamp Tax exemptions on property acquisitions under the special regime?
Yes, FIIAH real estate investment funds were entitled to IMT and Stamp Tax exemptions under the original regime established by Article 8(7)(a) and 8(8) of Law 64-A/2008. These exemptions applied to acquisitions of residential properties destined for rental purposes. However, Article 236 of Law 83-C/2013 introduced a transitional provision that retroactively modified this regime, requiring funds to pay taxes on previously exempted acquisitions if certain conditions were not met, thereby creating significant legal uncertainty regarding the temporal scope of these tax benefits.
Does Article 236 of Law 83-C/2013 violate the constitutional principle of non-retroactivity of tax law under Article 103(3) of the Portuguese Constitution?
The central issue in Decision 653/2016-T was whether Article 236 of Law 83-C/2013 violated Article 103(3) of the Portuguese Constitution, which enshrines the principle of non-retroactivity of tax law. The Claimant argued that applying the amended regime to acquisitions completed in 2013 under the original exemption framework constituted unconstitutional retroactive taxation. The Tax Authority contended that this was merely an application of the original FIIAH regime rather than retroactive law. The tribunal acknowledged its competence to assess the constitutional conformity of specific tax acts, distinguishing this from abstract constitutional review reserved for the Constitutional Court.
What is the CAAD arbitration procedure for challenging IMT and Stamp Tax assessments issued to FIIAH funds?
The CAAD arbitration procedure for challenging IMT and Stamp Tax assessments begins with submitting a request for arbitration within the statutory deadline. In this case, the request was filed on October 31, 2016, and accepted on November 18, 2016. The President of CAAD designates an arbitrator (single arbitrator for cases under the simplified regime), who must accept within the prescribed period. Parties have the right to refuse the arbitrator designation under Articles 6-7 of the Deontological Code. Once constituted, the tribunal has material jurisdiction under Article 2(1)(a) of RJAT. The tribunal may dispense with hearings if the documentary evidence is sufficient, as occurred in this case pursuant to Article 18 of RJAT.
Are taxpayers entitled to reimbursement and compensatory interest when IMT and Stamp Tax liquidations on FIIAH acquisitions are annulled?
Yes, pursuant to general principles of tax procedure law, taxpayers are entitled to reimbursement of amounts paid under illegal tax assessments, plus compensatory interest calculated according to legal provisions. In Decision 653/2016-T, the Claimant specifically requested annulment of the IMT and Stamp Tax assessments totaling €2,710.45 (paid on August 11, 2016) with reimbursement and compensatory interest. The legal basis for this claim derives from the illegality of the underlying assessments, which if declared null or annulled, triggers automatic restitution obligations under Article 43 of the LGT (General Tax Law) and interest calculation under Article 61 of the CPPT.
How does the transitional regime for FIIAH and SIIAH under Law 64-A/2008 interact with subsequent legislative changes to property tax exemptions?
The transitional regime under Article 236 of Law 83-C/2013 fundamentally altered the application of the original FIIAH special regime established by Law 64-A/2008. While the original law provided unconditional exemptions for property acquisitions by FIIAH funds, the 2013 amendment introduced Article 16 to Article 8 of Law 64-A/2008, creating conditions for retroactive taxation of previously exempted transactions. This interaction created legal uncertainty as funds that acquired properties under the exemption regime between 2008-2013 faced potential retroactive tax liability. The transitional provision attempted to apply the amended regime to past transactions, raising constitutional questions about whether legitimate expectations created under the original legislation were impermissibly violated by subsequent legislative changes eliminating tax benefits retroactively.