Summary
Full Decision
ARBITRAL DECISION
REPORT
The Applicant A…– Investment Fund Management Company, S.A. (Applicant), taxpayer no. … in its capacity as manager of the real estate investment fund B…– Closed Real Estate Investment Fund for Residential Rental, taxpayer no. …, with registered office in …, …, in Lisbon, submitted on 31/10/2016, a request for arbitral pronouncement with a view to assessing and declaring the illegality of the acts of assessment of Tax on Transfer of Real Estate (IMT) and Stamp Tax, in the total amount of € 2,804.27 (two thousand eight hundred and four euros and twenty-seven cents) on a real estate property of which it is the owner.
The Honorable President of the Deontological Council of the Centre for Administrative Arbitration (CAAD) appointed, on 04/01/2017, Dr. Andrea Firmino as sole arbitrator.
On 19/01/2017 the arbitral tribunal was constituted.
In compliance with the provisions of Article 17, No. 1 of the Legal Regime of Tax Arbitration (RJAT), the Tax and Customs Authority (AT) was notified on 23/01/2017, to, if willing, submit a response and request the production of additional evidence.
On 22/02/2017 the AT submitted a response, defending itself by way of exception and by way of objection, further proposing the dispensation of holding the meeting referred to in Article 18 of the RJAT.
On 30/05/2017 the arbitral tribunal decided to dispense with the holding of the meeting referred to in No. 1 of Article 18 of the RJAT, on the grounds of the principles of procedural economy and the prohibition of the practice of useless acts, as well as the submission of arguments by the parties, and scheduled the date for rendering the final decision.
On 06/07/2017 the arbitral tribunal decided to extend the deadline for rendering the arbitral decision until 19/07/2017.
On 21/07/2017, due to a period of excessive workload, the arbitral tribunal decided to extend the deadline for rendering the arbitral decision until 20/08/2017.
On 21/08/2017, due to a period of excessive workload, the arbitral tribunal again decided to extend the deadline for rendering the arbitral decision until 19/09/2017.
On 03/10/2017, the Honorable President of the Deontological Council of the Centre for Administrative Arbitration (CAAD) notified Dr. Andrea Firmino, in her capacity as arbitrator performing duties in the arbitral proceedings in question, to, within 48 hours, provide information as to whether the extension of the deadline referred to in Article 21 of the RJAT had occurred, and, in the affirmative case, what reasons justified it.
Once that deadline had elapsed, the arbitrator performing duties not having provided the requested clarifications, the Deontological Council of the Centre for Administrative Arbitration (CAAD) determined, on 10/10/2017, the termination of the mandate of Dr. Andrea Firmino as arbitrator in the aforementioned proceedings, and her replacement in those same functions by the arbitrator signing this decision.
CLARIFICATION OF PROCEDURAL MATTERS
The arbitral tribunal was duly constituted and has material jurisdiction.
The parties have legal personality and capacity and are legitimate, with no defects in representation.
The proceedings are not affected by defects that would affect their validity.
Consequently, the conditions are met for the final decision to be rendered.
POSITIONS OF THE PARTIES
There are two positions in confrontation, that of the Applicant, set out in the request for arbitral pronouncement, and that of the AT in its response.
According to the Applicant, the assessments that are the subject of this petition are illegal as it considers Article 236 of Law No. 83-C/2013, of 31 December, which approved the State Budget for 2014, to be unconstitutional, by violation of the provisions of Article 103, No. 3 of the Constitution of the Portuguese Republic.
To support its request, the Applicant further presents a legal opinion from Messrs. Professors Dr. C… and Doctor D…, on the constitutionality of No. 2 of Article 236 (Transitional Provision within the Special Regime Applicable to FIIAH and SIIAH) of Law No. 83-C/2013, of 31 December, corroborating the thesis of unconstitutionality it defends, and whose conclusions are transcribed:
"CONCLUSIONS
(…)
1) The State Budget Law for 2009 approved the legal regime of Real Estate Investment Funds for Residential Rental (FIIAH) and, within it, a special tax regime in its Article 8, including, as relevant here, exemptions from IMT and Stamp Tax for acquisitions by FIIAH of real estate and autonomous fractions intended for permanent residential rental and related acts and contracts.
2) The aforementioned exemptions, from taxes due at the moment of acquisition, were satisfied by the acquisition by FIIAH intended for residential rental, not depending on the completion of actual rental within a certain period nor on the non-alienation of the real estate in that same period, the legislator not having imposed on the FIIAH the risk of non-realization of the rental.
3) Article 235 of the State Budget Law for 2014 introduced new Nos. 14 to 16 in Article 8 of the FIIAH regime, which came to restrict the exemptions from IMT and Stamp Tax introduced by the State Budget Law for 2009, as they subordinated the qualification of the real estate as intended for permanent residential rental to the fact that it is effectively the subject of a permanent residential rental contract within three years from the moment it came to be part of the fund's assets, and provided that the aforementioned exemptions "cease to have effect" if the real estate has not been subject to a rental contract within that three-year period, the same occurring if the real estate is alienated before that three-year period (except if in the exercise of a purchase option by the tenant who had previously alienated the real estate to the FIIAH).
4) The requirement introduced in the State Budget Law for 2014 was not provided for in the original regime from 2008, and does not result, in particular, from the assumption that these were acquisitions of urban real estate or autonomous fractions "intended exclusively for residential rental," as this intended purpose is compatible, particularly in periods of crisis in the rental market, with difficulties and delays in the realization of the rental, nothing preventing, according to the original provision of the exemption, that the real estate would be acquired as intended exclusively for residential rental even though it would only come to be rented, for example, 3 and a half or 4 years after the acquisition.
5) Similarly, the alienation, within the three-year period from the acquisition, of real estate that had been acquired to be intended exclusively for rental also did not prevent the application of the exemption according to its original provision – being certain, moreover, that only 75% of the assets of the FIIAH had necessarily to be integrated by real estate intended for rental (Article 4, No. 1 of its regime).
6) The provision of a deadline for the realization of rental is not merely a form of verification of a requirement already provided for – in which case a new law would obviously be unnecessary – but rather represents the introduction, with the three-year period, of a new prerequisite for the exemption from IMT and Stamp Tax, with the effect of defining more restrictively the exception to the incidence that results from the exemption, providing that this "ceases to have effect."
7) The special transitional provision contained in Article 236, No. 2, of the State Budget Law for 2014, by ordering the application of the norms that restricted the exemption to acquisitions prior to its entry into force, effected at a moment when the exemption was provided without such limitations, restricts the exemption from IMT and Stamp Tax as to tax facts already exhausted, which are, for IMT and Stamp Tax, respectively, the onerous transfer of real estate and the act or contract connected with the acquisition.
8) The tax facts that give rise to the obligation of IMT and Stamp Tax are exhausted at the moment of their practice, and that is also the moment when the respective tax obligations arise (Articles 5, No. 2, and 5, paragraph a), respectively of the IMT Code and the Stamp Tax Code).
9) The norm of No. 2 of Article 236 of the State Budget Law for 2014 altered an essential element of the taxes in question (the exemptions, and, consequently, the scope of their incidence or field of application), as it concerns an element on which the very existence of the tax obligation depends (the "if" of the tax).
10) Article 103, No. 3, of the Constitution of the Portuguese Republic prohibits taxes of a retroactive nature, and this prohibition, introduced in 1997, came to make clear that the legislator is not permitted to provide for or alter in their essential elements taxes that apply to facts already exhausted at the moment of the law's entry into force – that is, that are authentically retroactive.
11) The wording of Article 103, No. 3, introduced in 1997 resulted in that, subsequently to 1997, and applying the new constitutional parameter, the Constitutional Court came to decide in the sense of the unconstitutionality of norms that create or alter in their essential elements taxes for facts that were completed prior to their entry into force (authentic retroactivity, as opposed to mere retrospectivity or inauthentic retroactivity).
12) As can be read in Judgment Nos. 128/2009 of the Constitutional Court, "given that the general principle of non-retroactivity of tax law is established, the mere retroactive nature of a tax law disadvantageous to individuals is sanctioned, automatically, by the Constitution, whatever the conduct of the tax administration or of the taxed individual may have been in the concrete case. In other words, the finding of unconstitutionality results only from the mere analysis of the normative data, and does not depend, at any moment, on the ascertainment of any circumstantial elements that result from the condition, in the concrete case, of a certain tax-legal relationship."
13) The norm of Article 236, No. 2, of the State Budget Law for 2014 is an authentically retroactive norm, as it orders the application of the new prerequisites of the exemptions – rental and non-alienation within a three-year period, on pain of these "ceasing to have effect" – to acquisitions and to acts (that is, to tax facts) prior to its entry into force and which were completed before this.
14) This does not prevent the argument that the restriction of the exemption by the provision of deadlines would only have aimed to verify the purpose of rental of the acquisitions, since such a prerequisite of the exemption was not previously realized and embodied in the law at the moment when the relevant tax facts (the acquisition of the real estate and the related acts and contracts) were completed.
15) For this same reason, the qualification of the norm of Article 236, No. 2, of the State Budget Law for 2014 as an interpretative norm would be improcedent, since the prerequisites that it added for the exemptions were not previously provided for.
16) It is irrelevant that it is provided in Article 236, No. 2, of the State Budget Law for 2014 that the three-year period is only counted from the entry into force of that law, since such a prerequisite of the exemption (the deadline) was not even required at the moment when the relevant tax facts were practiced.
17) Article 236, No. 2, of the State Budget Law for 2014 is unconstitutional, by violation of Article 103, No. 3, of the Constitution of the Portuguese Republic, by providing that the provisions of the new Nos. 14 to 16 of Article 8 of the legal regime of the FIIAH, which alter and restrict the exemptions previously provided for in Nos. 7 and 8 of that same article, is "equally applicable to real estate that has been acquired by FIIAH prior to 1 January 2014"."
The Applicant also considers that the assessments challenged are null under the provisions of paragraph d), No. 2, of Article 133 of the Code of Administrative Procedure (CPA) inasmuch as they violate the essential content of a fundamental right, and as such are subject to challenge at any time.
Otherwise, the AT, defending itself by way of exception and by way of objection, contends that the request for declaration of nullity of the assessments in question should be judged to be without merit.
By way of exception, the AT contends that the arbitral tribunal does not have material jurisdiction to determine or declare the constitutionality or unconstitutionality of Article 236 of Law 83-C/2013, of 31 December.
The AT further adds that jurisdiction for abstract review of legality and constitutionality is reserved for the Constitutional Court, whereby the arbitral tribunal is materially incompetent to assess, in the abstract, the constitutionality of Article 236 of Law No. 83-C/2013, of 31 December.
On the other hand, and also by way of exception, the AT contends that in the context of the review of abstract constitutionality, it would always be a legitimate party.
Now, according to the provisions of Article 4, No. 1, paragraph b), first part of the Statute of the Administrative and Tax Courts (ETAF), it falls within the scope of administrative jurisdiction the assessment of disputes that have as their object the review of the legality of legal acts emanating from the AT in the exercise of administrative function, whereas paragraph a) of No. 2 of the aforementioned Article 4 of the ETAF expressly removes from the scope of administrative and tax jurisdiction the assessment of disputes that have as their object the challenging of acts practiced in the exercise of political and legislative function.
Thus, in the same way that what justifies the absolute incompetence of the arbitral tribunal in reason of subject matter applies fully to ground the passive illegitimacy of the Applicant.
By way of objection, the AT defends itself by invoking that in the Portuguese administrative-legal order, the regular regime of invalidity of acts is, for reasons of legal certainty, mere annullability, including for those practiced on the basis of illegal or unconstitutional deliberations, with the Supreme Administrative Court having come to pronounce itself in that same sense.
The AT further contends that the law in question is not affected by retroactivity, inasmuch as the alienation of the real estate has as its necessary consequence the expiry of the tax benefit granted for allocation to rental.
Thus, and contrary to what the Applicant contends, there is no introduction ex novo of a regime of expiry of the benefit, and even less is there any frustration of the expectations of the taxed subjects or violation of the principle of non-retroactivity of tax law.
In light of the foregoing, the AT considers that the present request for arbitral pronouncement should be judged to be without merit.
QUESTIONS TO BE DECIDED
In the present proceedings the questions to be decided are:
To rule on the exception of incompetence of the arbitral tribunal;
To rule on the exception of passive illegitimacy;
To determine whether or not the assessments of IMT and Stamp Tax effected under Article 236 of Law No. 83-C/2013, of 31 December (State Budget for 2014) are illegal.
FACTUAL MATTER
FACTS CONSIDERED PROVEN
In light of the documents brought into the proceedings, the following is established as proven:
The fund B…– Closed Real Estate Investment Fund for Residential Rental was, at the date of the assessments in question, the owner of the real estate registered in the urban property registry of the parish of …, in the municipality of Campo Maior under registration number …, fraction "M",
The real estate in question was acquired on 18/12/2013, benefiting from exemption from IMT under paragraph a) of No. 7 of Article 8 of the special regime applicable to real estate investment funds for residential rental (FIIAH), and was alienated in 08/2016;
In accordance with what was mentioned in the request for arbitral pronouncement and in the response given by the AT, the assessment of IMT, … in the amount of € 1,766.97 (one thousand seven hundred and sixty-six euros and ninety-seven cents) and of Stamp Tax No. …, in the amount of € 1,037.30 (one thousand and thirty-seven euros and thirty cents) was effected, which were paid;
These assessments were made under Article 236 of Law No. 83-C/2013, of 31 December (State Budget for 2014).
FACTS NOT CONSIDERED PROVEN
There are no facts relevant to the decision that have not been established as proven.
THE LAW
ON THE INCOMPETENCE OF THE ARBITRAL TRIBUNAL
Before assessing the merits of the case, it is necessary, first and foremost, to rule on the exception of incompetence of the arbitral tribunal invoked by the AT.
As previously stated, the AT defends itself by way of exception by invoking that, as the Applicant alleges the unconstitutionality of the norm applied in the assessments in question, the arbitral tribunal is not competent to decide on the constitutionality or unconstitutionality of the norms.
Now, the arbitral tribunal will obviously not declare the (un)constitutionality of the norm in question, but only pronounce itself as to its concrete application to the concrete facts, evaluating the legality or otherwise of that application, whereby the arbitral tribunal has material jurisdiction.
The argument invoked by the AT as to the incompetence of the arbitral tribunal thus fails, whereby the exception in question is judged to be without merit.
ON PASSIVE ILLEGITIMACY
The argument invoked by the AT as to the incompetence of the arbitral tribunal failing, the exception in question is likewise judged to be without merit.
ON THE (IL)LEGALITY OF THE ACT OF ASSESSMENT OF IMT AND STAMP TAX
It is necessary, then, to decide on the merits of the request for arbitral decision of the assessments of IMT and Stamp Tax in question.
As is well known, Law No. 64-A/2008, of 31 December approved the special regime applicable to real estate investment funds for residential rental (FIIAH).
Under the provisions of No. 7 of Article 8, the following were exempt from IMT:
The acquisitions of urban real estate or autonomous fractions of urban real estate intended exclusively for permanent residential rental by the investment funds referred to in No. 1;
The acquisitions of urban real estate or autonomous fractions of urban real estate intended for permanent residential own use, as a result of the exercise of the purchase option referred to in No. 3 of Article 5 by the tenants of the real estate that form part of the assets of the investment funds referred to in No. 1.
Now the State Budget Law for 2014 came to alter the aforementioned Article 8 in the following terms:
"14 - For the purposes of the provisions of Nos. 6 to 8, urban real estate is considered to be intended for permanent residential rental whenever it is the subject of a permanent residential rental contract within three years counted from the moment it came to form part of the fund's assets, the taxed subject being required to communicate and provide proof to the AT of the respective actual rental within 30 days following the end of the aforementioned period.
15 - When the real estate has not been the subject of a rental contract 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 taxed subject shall request from the AT, within 30 days following the end of the aforementioned period, the assessment of the respective tax.
16 - In the event that the real estate is alienated, with the exception of cases provided for in Article 5, or in the event that the FIIAH is subject to liquidation, before the expiration of the period provided for in No. 14, the taxed subject shall likewise request from the AT, before the alienation of the real estate or the liquidation of the FIIAH, the assessment of the tax due in accordance with the previous number." [emphasis in original].
As mentioned previously, the real estate in question was acquired by the real estate investment fund B…– Closed Real Estate Investment Fund for Residential Rental in 2012, benefiting from exemption from IMT under paragraph a) of No. 7 of Article 8 of the special regime applicable to real estate investment funds for residential rental (FIIAH).
This norm requires that the real estate be intended for permanent residential rental in order for it to benefit from the aforementioned exemption.
To that extent, the obligation to intend the real estate for residential rental is not a requirement of the amendments introduced by the State Budget Law for 2014, but rather a requirement of the special regime applicable to real estate investment funds for residential rental (FIIAH) from the outset, indeed a natural consequence of the objectives and motivations that presided over the creation of these funds.
The State Budget for 2014 certainly comes to establish a new requirement for the exemption: if the allocation to permanent residential rental does not occur within the period of 3 years after the entry of the real estate into the fund, the fund shall request the assessment of the IMT that was not assessed.
However, this was not the case in question, contrary to what appears to follow from the argument of the Applicant, let us see why.
The assessments of IMT and Stamp Tax in question were not based on its remaining in the fund for a period equal to or greater than 3 years without there having been allocation to permanent residential rental.
In fact, the assessments in question, as follows from the assessment notes attached to the proceedings, were based on the fact that the real estate was given "a purpose different from that on which the benefit was based."
On this matter there is already abundant arbitral jurisprudence in the sense of the legality of the challenged acts, in proceedings No. 398/2015-T, No. 688/2015-T, No. 689/2015-T, No. 709/2015-T, No. 710/2015-T, No. 729/2015-T, No. 735/2015-T, No. 76/2016-T, No. 93/2016-T, No. 241/2016-T, No. 269/2016-T and No. 617/2016-T, let us see.
Arbitral Decision No. 398/2015-T
"Now, it is necessary to evaluate the legality of the IMT assessments at issue.
As mentioned above, both real estate properties that were the subject of assessment were acquired by the Applicant at the beginning of 2014, benefiting from IMT exemption under paragraph a) of No. 7 of Article 8 of the legal regime of the FIIAH. Such a norm requires that the real estate be intended for permanent residential rental in order to benefit from such exemption.
Now, the obligation to intend the real estate for residential rental is not a requirement of the amendments introduced by the State Budget for 2014, but rather a requirement of the tax regime of the FIIAH from the outset, indeed a natural consequence of the motivations that led to the creation of these funds.
[…] The IMT assessments made with respect to the real estate described above were not based on its remaining in the fund for a period equal to or greater than 3 years without there having been allocation to permanent residential rental. In fact, as follows from the documentation attached to the proceedings, both real estate properties remained in the fund for only a few months. The assessments in question, indeed as follows from the assessment notes attached to the proceedings, were based on the fact that the real estate was given "a purpose different from that on which the benefit was based." Now, to this statement made by the AT that the real estate was given a different purpose, that is, that they were not allocated to permanent residential rental, the Applicant responds only in its arguments that "It does not understand, however, where the Tax Authority obtained such an idea," saying nothing more about what is an essential requirement for the application of the exemption.
Thus, we understand that the issue at hand is not the retroactivity or otherwise of the applied norm, which would be the case if, by way of example, the real estate remained in the fund for a period of 3 years without yet having been allocated to permanent residential rental and, for that fact, there had been an assessment of IMT.
In the concrete case this is not what is at issue. The real estate in question is alienated without having fulfilled its purpose - allocation to permanent residential rental. It is not a matter of deadline. Alienated as it is, that purpose can no longer be fulfilled, whereby the requirement established for the exemption from IMT to be applicable has not been met.
For compliance with paragraph a) of No. 7 of Article 8, it is not enough to have a declared intention at the time of acquisition of the real estate but rather an effective allocation to permanent residential rental. Now, the Applicant does not prove in any way in this proceeding, nor in the prior administrative proceeding the fulfillment of that requirement.
We thus understand that the issue at hand is not the retroactivity or otherwise of the law, nor is there any injury to the expectations of the Applicant or worsening of its tax position. The rationale for the attribution of a tax benefit in the context of IMT to the FIIAH was clearly established from the outset – "The acquisitions of urban real estate or autonomous fractions of urban real estate intended exclusively for permanent residential rental by the investment funds...";
We thus understand that the IMT assessment in question is legal under paragraph a) of No. 7 of Article 8. Let us now see the rationale for the IMT assessment under Article 235, No. 16 of Law 83/2013 of 31 December." [emphasis in original].
Arbitral Decision No. 688/2015-T
"Now, taking into consideration the alienation of the real estate identified in point 5.2.2., above, for purposes different from those for which the aforementioned tax benefits were granted, such would have determined (and did determine in the case at issue), the automatic restoration of standard taxation.
Thus, given the foregoing, this Arbitral Tribunal understands that what is provided for in No. 16 of Article 236 of the Transitional Regime, applied in conjunction with what is provided for in No. 15 of the same article, in no way alters the substance or requirements for applicability of the exemptions established by Article 8, No. 7 and No. 8 of the special regime applicable to FIIAH and SIIAH, with respect to the disputed assessments.
In these terms, taking into consideration the conclusions that follow from the analysis presented above, the Tribunal understands that the answer to be given to the question raised in point 6.1., above, will be negative, that is, that the assessments of IMT and Stamp Tax that are the subject of the request for arbitral pronouncement do not suffer from any illegality, whereby the request for arbitral pronouncement should be considered to be without merit."
Arbitral Decision No. 689/2015-T
"The fact that the Applicant proceeded to alienate the real estate which, upon acquiring it, declared it would allocate for the purpose that allowed it to be recognized – as it was – the exemption from IMT and Stamp Tax, would always determine, even if the added number 16 did not explicitly provide for it, the expiry of such exemptions, as a result of the provisions of Article 12 and No. 3 of Article 14 of the Statute of Tax Benefits (former 12, No. 3, in the wording of the Statute of Tax Benefits that was in effect 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 alienated or given another purpose without authorization from the Minister of Finance, without prejudice to other sanctions or different regimes established by law."
The Applicant neither alleged nor, a fortiori, demonstrated having obtained the authorization provided for there, or any other circumstance that would prevent the granted exemptions from ceasing to have effect as a consequence of the alienation.
It is for this reason that, as we have already mentioned above, we understand that the alleged unconstitutionality of the provisions added is not at issue in the case at hand, to the extent that, in the part corresponding to the alienation of the real estate, No. 16 of Article 8 of the Legal Regime of the FIIAH merely reiterates what already resulted from the provisions of the Statute of Tax Benefits.
Which, moreover, is well understood, given the rationale for the granting of the tax benefits.
The rationale for the attribution of the tax benefit in the context of IMT and Stamp Tax to the FIIAH is, clearly, its allocation to permanent residential rental - "The acquisitions of urban real estate or autonomous fractions of urban real estate intended exclusively for permanent residential rental by the investment funds..." – whereby the consequence of it being given a different purpose is that the exemption could not have been granted, and there is a need to restore legality by assessing the taxes that, were it not for the declaration of intention made at the time of acquisition, would have been assessed.
Which the Applicant recognized, all the more so as that is exactly what appears in the declarations made by the Applicant itself for the assessment of IMT and Stamp Tax."
Arbitral Decision No. 709/2015-T
"For compliance with the provisions of paragraph a), of No. 7 of Article 8 of the special regime applicable to real estate investment funds for residential rental (FIIAH), it is not enough to have a declared intention at the time of acquisition of the real estate, but rather an effective allocation to permanent residential rental.
Now, the Applicant does not prove in any way in this proceeding the fulfillment of that requirement.
[…] We thus understand that the issue at hand is not the retroactivity or otherwise of the law, nor is there any injury to the expectations of the Applicant or worsening of its tax position. The rationale for the attribution of a tax benefit in the context of IMT to the FIIAH was clearly established from the outset - "The acquisitions of urban real estate or autonomous fractions of urban real estate intended exclusively for permanent residential rental by the investment funds..."."
Arbitral Decision No. 710/2015-T
"And, thus being and in this decision-making segment, we again adhere to the position expressed in the CAAD decision in proceeding No. 398/2005-T, in the sense that it is not even a matter of a test of retroactivity of the applied norm, but rather the fact that the fraction in question was alienated «without having fulfilled its purpose - allocation to permanent residential rental» and that «alienated as it is [the fraction], that purpose can no longer be fulfilled, whereby the requirement established for the exemption from IMT to be applicable has not been met» (cited, p. 10).
[...] Thus being, and since the disputed assessments resulted from a declaration by the Applicant, it is not even necessary to dwell on the correctness of the assessments as far as their timeliness is concerned. In any case, let it be recalled that No. 15 of the Special Regime, as amended by the State Budget Law for 2009, establishes that when the real estate has not been the subject of a rental contract within the three-year period, the benefits cease to have effect, and it is incumbent on the taxed subject to request from the AT, within thirty days following the end of the aforementioned period, the assessment of the respective tax. Now, as we have seen, in the case at issue there was an acquisition and alienation of a fraction that never came to be allocated to permanent residential rental by the Applicant, whereby it – as indeed it did – should request the assessment of the respective tax." [emphasis in original].
Arbitral Decision No. 729/2015-T
"The rationale for the attribution of the tax benefit in the context of IMT and Stamp Tax to the FIIAH is, clearly, its allocation to permanent residential rental - "The acquisitions of urban real estate or autonomous fractions of urban real estate intended exclusively for permanent residential rental by the investment funds..." - whereby the consequence of it being given a different purpose is that the exemption could not have been granted, and there is a need to restore legality by assessing the taxes that, were it not for the declaration of intention made at the time of acquisition, would have been assessed.
Which the Applicant recognized, all the more so as that is exactly what appears in the declarations made by the Applicant itself for the assessment of IMT and Stamp Tax.
Concluding, the alienation of the fraction would always determine the expiry of the exemption as a result of the provisions of No. 3 of Article 14 of the Statute of Tax Benefits, and therefore it is not a matter of any retroactive application of a norm that introduces a new regime of expiry of the exemptions, nor is there any injury to the expectations of the Applicant or worsening of its tax position, whereby we understand that the assessments of IMT and Stamp Tax in dispute are legal.
The analysis of the question raised by the Applicant regarding the alleged retroactivity of the regime provided for in Article 236 of the State Budget Law for 2014 is thus rendered moot, to the extent that, as demonstrated above, the circumstances that gave rise to the disputed tax assessments have nothing to do with the aforementioned norm, but only with the alienation of the real estate and consequent allocation to a purpose different from that for which the exemptions from IMT and Stamp Tax were granted." [emphasis in original].
Arbitral Decision No. 735/2015-T
"Now, taking into consideration the alienation of the real estate identified (…), above, for purposes different from those for which the aforementioned tax benefits were granted, such would have determined (and did determine in the case at issue), the automatic restoration of standard taxation.
Thus, given the foregoing, this Arbitral Tribunal understands that what is provided for in No. 16 of Article 236 of the Transitional Regime, applied in conjunction with what is provided for in No. 15 of the same article, in no way alters the substance or requirements for applicability of the exemptions established by Article 8, No. 7 and No. 8 of the special regime applicable to FIIAH and SIIAH, with respect to the disputed assessments.
In these terms, taking into consideration the conclusions that follow from the analysis presented above, the Tribunal understands that the answer to be given to the question raised in (…), above, will be negative, that is, that the assessments of IMT and Stamp Tax that are the subject of the request for arbitral pronouncement do not suffer from any illegality, whereby the request for arbitral pronouncement should be considered to be without merit.
As a consequence of the conclusion mentioned (…), above, the analysis of the question raised by the Applicant regarding the alleged retroactivity of the regime provided for in Article 236 of the State Budget Law for 2014 is rendered moot, since, as demonstrated above, the circumstances that gave rise to the disputed tax assessments derive from the fact that the real estate (…) was given a purpose different from that for which the exemptions from IMT and Stamp Tax were granted."
Arbitral Decision No. 76/2016-T
"In this framework, it is our understanding that No. 16 of Article 8 of the special regime applicable to FIIAH and SIIAH, applied in conjunction with what is provided for in No. 15 of the same article, does not produce any alteration in the substance and/or in the requirements for applicability of the exemptions established by Nos. 7 and 8 of the same Article 8, as far as the disputed assessments of IMT and Stamp Tax are concerned.
In fact, contrary to what is alleged by the Applicant, it is not correct to say that the facts or circumstances on which the respective expiry depended were not already legally provided for at the moment the exemption was recognized, at least with respect to the circumstance that occurred in the present case: the alienation of the real estate."
Arbitral Decision No. 93/2016-T
"The rationale for the attribution of the tax benefit in the context of IMT and Stamp Tax to the FIIAH is, clearly, its allocation to permanent residential rental - «The acquisitions of urban real estate or autonomous fractions of urban real estate intended exclusively for permanent residential rental by the investment funds...» - whereby the consequence of it being given a different purpose is that the exemption could not have been granted, and there is a need to restore legality by assessing the taxes that, were it not for the declaration of intention made at the time of acquisition, would have been assessed.
Concluding, the alienation of the real estate would always determine the expiry of the exemption as a result of the provisions of No. 3 of Article 14 of the Statute of Tax Benefits, and therefore it is not a matter of any retroactive application of a norm that introduces a new regime of expiry of the exemptions, nor is there any injury to the expectations of the Applicant or worsening of its tax position, whereby we understand that the assessments of IMT and Stamp Tax in dispute are legal." [underlined in original].
Arbitral Decision No. 241/2016-T
"The issue at hand is not the retroactivity or otherwise of the normative provisions introduced by the State Budget Law for 2014, nor does it appear that there is any injury to the expectations of the Applicant or worsening of its tax position, inasmuch as it well knew that the prerequisite for the operation of the exemptions from IMT and Stamp Tax, established since the 2008 version, was that the acquisitions of urban real estate or autonomous fractions of urban real estate be intended, exclusively, for permanent residential rental. Lastly, the new regime established by the transitional norm contained in Article 236 of the State Budget Law for 2014 has no causal relationship with the reason for the assessments in question, and the normative provisions introduced do not alter the requirements of the exemption established by the special tax regime applicable to SIIAH and FIIAH in effect since 01-01-2009." [underlined in original].
Arbitral Decision No. 269/2016-T
"As to the retroactive application of the norm of Article 236 of Law 83-C/2013, we do not see, in the concrete case, the reason for it to be invoked, to the extent that the assessments in question, from the tribunal's point of view, had nothing to do with the aforementioned norm, but only with the fact that at the time of acquisition it was declared that the real estate was intended for permanent residential rental and it came to be exchanged, not fulfilling thus the prerequisites of the granted exemption, it being the case that it is not enough to have the intention declared in the title of acquisition, but rather its effective realization, which did not occur.
From the foregoing the tribunal considers that the assessments of IMT and Stamp Tax in question result from the fact that the applicant did not observe what was prescribed in paragraph a) of No. 7 of Article 8 of the special regime applicable to real estate investment funds for residential rental, approved by Law No. 64-A/2008 of 31 December, and not from the amendments introduced by Law No. 83-C/2013, as the applicant claims, whereby there is no retroactive application here, what occurred was a purpose different from the one declared at the acquisition of the real estate, and therefore the assessments are legal, such that the analysis of the question of indemnitory interest requested becomes moot." [underlined in original].
Arbitral Decision No. 617/2016-T
"It is not understood, therefore, how it can be argued that the exemptions from IMT and Stamp Tax in question were not, at the date, conditioned to the subsequent verification of any facts or circumstances, nor subject to any regime of expiry.
However, the exemption itself is conditioned to the facts and circumstances for which it is granted and which result from its provision and normative statute.
Now, resulting from the established facts that the acts of assessment in question concern real estate that was alienated, it is verified that in light of the legal regime of the FIIAH established from the outset, the exemption from IMT and Stamp Tax expired, as the purpose of the real estate ceased to be exclusively permanent residential rental.
Taking into account that the acts of assessment of IMT and Stamp Tax now in dispute are based on the legal provisions of Article 34, Nos. 1 and 2 of the IMT Code and the provisions of Article 8, Nos. 7 and 8 of the Tax Regime of FIIAH, in the wording in effect at the date of acquisition of the real estate by the Fund, the acts of assessment in question are legal, since the granted exemption expired with the alienation of the real estate, given the alteration of the purpose of the real estate, prerequisite of the tax benefit granted."
Here arrived, we understand that the issue at hand is not the retroactivity or otherwise of the applied norm, which would be the case if, by way of example, the real estate remained in the fund for a period of 3 years without yet having been allocated to permanent residential rental and, for that fact, there had been an assessment of IMT.
In the case at issue this is not what is at hand.
The real estate in question was alienated without having fulfilled its purpose – allocation to permanent residential rental. It is not, therefore, a matter of deadline. Alienated as it is, that purpose can no longer be fulfilled, whereby the requirement established for the exemption from IMT to be applicable has not been met.
For compliance with the provisions of paragraph a) of No. 7 of Article 8 of the special regime applicable to real estate investment funds for residential rental (FIIAH), it is not enough to have a declared intention at the time of acquisition of the real estate, but rather an effective allocation to permanent residential rental.
Now, the Applicant does not prove in any way in this proceeding the fulfillment of that requirement.
We thus understand that the issue at hand is not the retroactivity or otherwise of the law, nor is there any injury to the expectations of the Applicant or worsening of its tax position.
In fact, the rationale for the attribution of a tax benefit in the context of IMT to the FIIAH was clearly established from the outset – "the acquisitions of urban real estate or autonomous fractions of urban real estate intended exclusively for permanent residential rental by the investment funds (…)".
Given all the foregoing, it is to be concluded that the assessments of IMT and Stamp Tax in question are legal under paragraph a) of No. 7 of Article 8 of the special regime applicable to real estate investment funds for residential rental (FIIAH).
DECISION
With the grounds set forth, the arbitral tribunal decides to judge the request for arbitral pronouncement to be wholly without merit, with all legal consequences.
VALUE OF THE PROCEEDINGS
The value of the proceedings is fixed at € 2,804.27 (two thousand eight hundred and four euros and twenty-seven cents), in accordance with Article 97-A of the Tax Procedure and Process Code (CPPT), applicable by force of paragraphs a) and b) of No. 1 of Article 29 of the RJAT and No. 2 of Article 3 of the Regulations for Costs in Tax Arbitration Proceedings (RCPAT).
COSTS
Costs to be borne by the Applicant, in the amount of € 612.00 (six hundred and twelve euros), in accordance with Table I of the Regulations for Costs in Tax Arbitration Proceedings, in accordance with No. 2 of Article 22 of the RJAT.
Notify.
Lisbon, 15 November 2017
The Arbitrator,
(Hélder Filipe Faustino)
Document prepared by computer, in accordance with the provisions of No. 5 of Article 131 of the Code of Civil Procedure, applicable by reference from paragraph e) of No. 1 of Article 29 of the RJAT. The wording of the present decision is governed by the spelling prior to the Orthographic Agreement of 1990.
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