Process: 656/2018-T

Date: May 24, 2019

Tax Type: Outros

Source: Original CAAD Decision

Summary

This CAAD arbitration decision (Process 656/2018-T) addresses whether real estate investment funds qualify for IMT (Municipal Tax on Onerous Property Transfers) exemption under Portuguese tax law. The applicant company purchased urban property for €6 million from an open real estate investment fund and paid €390,000 in IMT at the normal rate. The taxpayer subsequently requested official review (revisão oficiosa) claiming entitlement to the 50% reduced rate under Article 49 of the Estatuto dos Benefícios Fiscais (EBF), as amended by the 2014 State Budget Law. When the Tax Authority failed to respond, resulting in tacit rejection, the taxpayer initiated CAAD arbitration proceedings seeking partial annulment of the IMT assessment for €195,000. The tribunal analyzed the evolution of tax legislation governing real estate investment funds, including Decree-Law 246/85 establishing initial tax incentives, Decree-Law 287/2003 reforming asset taxation, and subsequent amendments through State Budget Laws. The decision examines whether properties held by open real estate investment funds of public subscription qualify for the reduced IMT rate. The arbitral tribunal, composed of three arbitrators appointed by the CAAD Ethics Council, accepted jurisdiction under the RJAT (Legal Framework for Tax Arbitration). The Tax Authority opted not to file a defense response, and the case proceeded without oral hearings pursuant to Article 16 and 29 of the RJAT, demonstrating the streamlined nature of Portuguese tax arbitration procedures for resolving IMT disputes.

Full Decision

ARBITRAL DECISION (consult full version in PDF)

The Arbitrators José Pedro Carvalho (Arbitrator President), Suzana Fernandes da Costa and António Alberto Franco, appointed by the Ethics Council of the Centre for Administrative Arbitration to form an Arbitral Tribunal, hereby decide as follows:

I – REPORT

1. On 20 December 2018, A..., LDA., NIPC..., with registered office at ..., n.º..., ... left side, ...-... Lisbon, filed a request for constitution of an arbitral tribunal, under the combined provisions of articles 2 and 10 of Decree-Law no. 10/2011, of 20 January, which approved the Legal Framework for Arbitration in Tax Matters, as amended by article 228 of Law no. 66-B/2012, of 31 December (hereinafter, abbreviated as RJAT), seeking the partial annulment (in the part corresponding to the amount of €195,000.00) of the assessment act for Municipal Tax on Onerous Property Transfers (IMT) no. ..., in the total amount of €390,000.00, as well as of the implied rejection of the request for ex officio review which had this act as its subject matter.

2. To substantiate its request, the Applicant alleges, in summary, the illegality of the said IMT assessment due to errors in the factual and legal premises.

3. On 21-12-2018, the request for constitution of the arbitral tribunal was accepted and automatically notified to the Tax Authority (AT).

4. The Applicant did not proceed with the appointment of an arbitrator, wherefore, under the provisions of paragraph a) of item 2 of article 6 and paragraph a) of item 1 of article 11 of the RJAT, the President of the Ethics Council of the CAAD appointed the signatories as arbitrators of the collective arbitral tribunal, who communicated acceptance of the appointment within the applicable period.

5. On 08-02-2019, the parties were notified of these appointments and did not manifest any intention to challenge them.

6. In accordance with the provision of paragraph c) of item 1 of article 11 of the RJAT, the collective Arbitral Tribunal was constituted on 28-02-2019.

7. On 19-03-2019, the Respondent manifested its intention not to file a reply.

8. Under the provisions of paragraphs c) and e) of article 16, and item 2 of article 29, both of the RJAT, the holding of the meeting referred to in article 18 of the RJAT was waived, as well as the submission of arguments by the parties.

9. It was indicated that the final decision would be notified by the deadline set out in article 21/1 of the RJAT.

10. The Arbitral Tribunal is materially competent and is regularly constituted in accordance with articles 2, item 1, paragraph a), 5 and 6, item 2, paragraph a), of the RJAT.
The parties have legal personality and capacity, are legitimately constituted and are legally represented in accordance with articles 4 and 10 of the RJAT and article 1 of Order no. 112-A/2011, of 22 March.
The case is not affected by any nullities.
Thus, there is no obstacle to the consideration of the case.

Having examined all matters, we hereby render

II. DECISION

A. FACTUAL MATTER

A.1. Facts established as proven

1. The Applicant is engaged in the purchase, sale, resale, lease and construction of real property.

2. On 03-03-2016, the Applicant executed with the Real Estate Asset Management Fund – B... a contract of purchase and sale, through which it acquired the urban property ("land for construction"), with the registration article no. ..., located in the Municipality Union of ... and ..., municipality of Évora, for the amount of €6,000,000.00.

3. The Fund is an investment vehicle which, at the date of the facts, constituted an open real estate investment fund.

4. In connection with the said acquisition, an IMT assessment act no. ..., in the amount of €390,000.00, was issued.

5. The said declaration was issued following submission of the IMT Model 1 declaration presented by the Applicant, which contained, among other things, the following:

6. The said amount corresponded to the application of the normal IMT rate provided for at the time in the applicable legislation to the above-mentioned transfer.

7. The Applicant made full payment of the said IMT assessment.

8. The Applicant filed a request for ex officio review concerning the IMT assessment sub iudice.

9. Up to the date of filing the arbitral request, the Applicant had not been notified of any decision regarding the ex officio review request filed, and therefore presumed its implied rejection.

A.2. Facts established as not proven

No facts relevant to the decision should be considered as not proven.

A.3. Reasoning for the proven and unproven factual matter

With respect to the factual matter, the Tribunal need not pronounce itself on everything alleged by the parties; rather, it has the duty to select the facts relevant to the decision and to distinguish proven from unproven matters (see article 123, item 2, of the CPPT and article 607, item 3 of the CPC, applicable by virtue of article 29, item 1, paragraphs a) and e), of the RJAT).

In this manner, the facts pertinent to the judgment of the case are chosen and selected according to their legal relevance, which is established having regard to the various plausible solutions to the question(s) of law (see former article 511, item 1, of the CPC, corresponding to current article 596, applicable by virtue of article 29, item 1, paragraph e), of the RJAT).

Thus, having regard to the positions assumed by the parties, in light of article 110/7 of the CPPT, the documentary evidence and the administrative procedure file joined to the case, the facts listed above were considered proven as relevant to the decision, taking into account that, as written in the Decision of the TCA-South of 26-06-2014, delivered in case 07148/13, "the probative value of the tax inspection report (...) may have probative force if the assertions contained therein are not impugned".

No allegations made by the parties and presented as facts consisting of strictly conclusive assertions, incapable of proof and whose veracity must be assessed in relation to the specific factual matter consolidated above, were considered either proven or unproven.

B. ON THE LAW

The essential issue raised in the present case is to determine whether the exemption provided for in article 49 of the EBF, as worded by Law no. 83-C/2013, of 31 December, which approved the State Budget Law for 2014, is applicable to the case sub iudice, which provided that "the rates of municipal property tax and municipal tax on onerous property transfers applicable to properties comprised in open or closed real estate investment funds of public subscription, pension funds and retirement savings funds that are constituted and operate in accordance with national legislation are reduced by half".

In accordance with article 5, item 1 of the IMT Code, the incidence of IMT is regulated by the legislation in force at the time when the tax obligation is constituted, with item 2 establishing that this is constituted at the moment when the transfer occurs.

As appears from the established factuality, the Applicant acquired, through a contract of purchase and sale, on 03-03-2016, an urban property ("land for construction"), in the Municipality Union of ... and ..., municipality of Évora, to which the registration article no. ... corresponds.

The transferor – Real Estate Asset Management Fund – B... – was, at the date of the facts, an open real estate investment fund, whose commencement of activities dates to 18 January 2011.

The legal framework applicable to investment funds, created by Decree-Law no. 246/85, of 12-07, and subsequently supplemented by Decree-Law no. 1/87 of 03-01, created tax incentives for the establishment of real estate investment funds.

Later, Decree-Law no. 287/2003, of 12 November, reformed the taxation of assets, approving the CIMI and the CIMT, published respectively in its annexes I and II.

The State Budget Law for 2007, in its article 82, amended the wording of article 46 of the EBF, which thereafter provided, in addition to the exemption from Municipal Property Tax (IMI) for properties comprised in open real estate funds, an IMT exemption for the said properties. Thus, properties comprised in mixed or closed funds, provided certain conditions were met, would be entitled to a 50% reduction in the IMT rate.

This article 82 made no reference to the stamp duty exemption (IMT) which was enshrined in article 1 of Decree-Law no. 1/87 of 03-01.

The aforementioned normative framework remained in force until the end of 2013, and was amended with the publication of Law no. 83-C/2013, of 31 December, which approved the State Budget Law for 2014.

As a result of this law, article 49 of the EBF thereafter provided that the rates of municipal property tax and municipal tax on onerous property transfers applicable to properties comprised in open or closed real estate investment funds of public subscription, pension funds and retirement savings funds that are constituted and operate in accordance with national legislation would be "reduced by half".

The said rule was subsequently repealed by article 215, item 1, paragraph g), of Law no. 7-A/2016, of 30 March, which approved the State Budget Law for 2016.

It is thus verified that at the date of transfer of the property subject to the assessment sub iudice, the said wording of article 49 of the EBF was in force, which provided for a reduction by half of the IMT rate applicable to the transfer of properties comprised in open real estate investment funds.

As results from the facts established as proven, the assessment subject of the present arbitral action corresponded to the application of the normal IMT rate provided for at the time in the applicable legislation to the value of the transfer in question in the case file.

Notwithstanding, as mentioned, the said final wording of article 49 of the EBF was still in force at that date, which provided for a reduction by half of the IMT rate applicable to the transfer of properties comprised in open real estate investment funds.

Hence, there is no doubt that the normal IMT rate provided for at the time in the applicable legislation should not have been applied to the value of the transfer in question in the case file.

From the foregoing, no other conclusion can be drawn than that the assessment act subject of the present arbitral action is affected by a legal error, by violation of the said article 49 of the EBF, as worded by Law no. 83-C/2013, of 31 December.

Accordingly, the arbitral request must succeed, and the assessment in dispute must be annulled in the part in which it exceeds half of the normal IMT rate provided for at the time in the applicable legislation to the value of the transfer in question in the case file.

*

As to the request for compensatory interest formulated by the Applicant, article 43, item 1, of the LGT establishes that compensatory interest is due when it is determined that there was an error attributable to the services resulting in payment of the tax debt in an amount greater than legally due.

Indeed, article 43/1 of the LGT provides that:

"Compensatory interest is due when it is determined, in a gracious reclamation or judicial challenge, that there was an error attributable to the services resulting in payment of the tax debt in an amount greater than legally due."

In the present case, it is proven that the assessment was issued at the request of the Applicant, which did not indicate verification of the prerequisites for any tax benefit, wherefore only after the lapse of the period the Respondent had to pronounce itself on the matter, which it failed to do, can the error affecting the said assessment be considered attributable to it.

The Applicant is therefore entitled to be reimbursed of the amount it paid (pursuant to articles 100 of the LGT and 24, item 1, of the RJAT) by virtue of the annulled acts and, further, to be indemnified for the improper payment through the payment of compensatory interest by the Tax Authority, from the formation of the implied rejection of the ex officio review request filed by the Applicant, until reimbursement, at the legal default rate, in accordance with articles 43, items 1 and 4, and 35, item 10, of the LGT, article 559 of the Civil Code and Order no. 291/2003, of 8 April.

*

C. DECISION

In these terms, this Arbitral Tribunal decides to uphold entirely the arbitral request filed and, consequently,

a) To partially annul the IMT assessment act no. ..., in the part in which it exceeds half of the normal IMT rate provided for at the time in the applicable legislation to the value of the transfer in question in the case file;

b) To condemn the Tax Authority to refund the amount of tax improperly paid and to payment of compensatory interest as indicated above;

c) To condemn the Respondent to payment of the costs of the proceeding, as determined below.

D. Case Value

The case value is fixed at €195,000.00, pursuant to article 97-A, item 1, paragraph a), of the Code of Tax Procedure and Process, applicable by virtue of paragraphs a) and b) of item 1 of article 29 of the RJAT and item 3 of article 3 of the Regulation of Costs in Tax Arbitration Proceedings.

E. Costs

The arbitration fee is fixed at €3,672.00, pursuant to Table I of the Regulation of Costs in Tax Arbitration Proceedings, to be paid by the Tax Authority, since the request was entirely upheld, in accordance with articles 12, item 2, and 22, item 4, both of the RJAT, and article 4, item 5, of the said Regulation.

Notice to be served.

Lisbon, 24 May 2019

The Arbitrator President

(José Pedro Carvalho)

The Arbitrator Member

(Suzana Fernandes da Costa)

The Arbitrator Member

(António Alberto Franco)

Frequently Asked Questions

Automatically Created

Are real estate investment funds exempt from IMT (property transfer tax) in Portugal?
Yes, real estate investment funds can benefit from IMT exemptions or reduced rates in Portugal. Under Article 49 of the Estatuto dos Benefícios Fiscais (EBF), as amended by Law 83-C/2013 of December 31, 2013 (State Budget Law for 2014), properties held by open or closed real estate investment funds of public subscription, pension funds, and retirement savings funds that are constituted and operate according to Portuguese law are subject to a 50% reduction in both municipal property tax (IMI) and municipal tax on onerous property transfers (IMT). This represents a significant tax benefit designed to incentivize real estate investment fund activity in Portugal.
What legal basis supports IMT tax exemption for real estate investment funds under Portuguese law?
The legal basis for IMT tax exemptions for real estate investment funds derives from multiple legislative sources in Portuguese tax law. The framework originated with Decree-Law 246/85 of July 12, 1985, which created tax incentives for establishing real estate investment funds, supplemented by Decree-Law 1/87 of January 3, 1987. The current regime is governed primarily by Article 49 of the Estatuto dos Benefícios Fiscais (EBF - Tax Benefits Statute), as amended by successive State Budget Laws, particularly Law 83-C/2013 approving the 2014 State Budget. Additionally, Decree-Law 287/2003 of November 12 reformed asset taxation by approving the IMI and IMT codes. The applicable legislation is determined by Article 5(1) of the IMT Code, which specifies that IMT incidence is regulated by legislation in force when the tax obligation is constituted, which occurs at the moment of transfer according to Article 5(2).
Can taxpayers challenge IMT liquidation through CAAD tax arbitration proceedings?
Yes, taxpayers can challenge IMT liquidation through CAAD (Centro de Arbitragem Administrativa) tax arbitration proceedings in Portugal. Under Articles 2 and 10 of Decree-Law 10/2011 of January 20, 2011, which approved the RJAT (Legal Framework for Arbitration in Tax Matters), as amended by Article 228 of Law 66-B/2012, taxpayers may request constitution of an arbitral tribunal to contest IMT assessments. The arbitral tribunal has material competence to annul or partially annul IMT liquidation acts under Article 2(1)(a) of the RJAT. Proceedings can also challenge tacit rejection of official review requests. The CAAD Ethics Council appoints arbitrators when parties do not make their own appointments, as specified in Article 6(2)(a) and Article 11(1)(a) of the RJAT. The process provides an alternative to traditional court litigation for resolving IMT disputes.
What is the procedure for requesting an official review (revisão oficiosa) of an IMT tax assessment in Portugal?
The procedure for requesting official review (revisão oficiosa) of an IMT assessment in Portugal is governed by the CPPT (Código de Procedimento e de Processo Tributário - Tax Procedure and Process Code). Taxpayers submit a written request to the Tax Authority asking for reconsideration of the IMT liquidation act, identifying the alleged errors in factual or legal premises. The request should specify the legal grounds for review and may be filed even after payment of the tax. The Tax Authority must analyze the request and issue a decision. There is no formal requirement for the taxpayer to appoint representation for the review request itself, though legal assistance is advisable. The request for official review does not suspend collection of the tax unless accompanied by appropriate guarantees, and taxpayers retain the right to challenge the assessment through alternative means, including CAAD arbitration.
What happens when the Portuguese Tax Authority (AT) does not respond to a review request, resulting in tacit rejection?
When the Portuguese Tax Authority (AT) fails to respond to an official review request within the legally prescribed timeframe, tacit rejection (indeferimento tácito) occurs automatically. This procedural silence is treated as an implicit negative decision under Portuguese administrative law principles. Taxpayers may then exercise their legal remedies as if an express rejection had been issued. Specifically, the tacit rejection can be challenged through CAAD arbitration proceedings under Article 10 of the RJAT, as demonstrated in this case where the applicant requested annulment of both the IMT assessment and the implied rejection of the review request. The tacit rejection establishes standing to initiate arbitration without waiting indefinitely for an express decision, protecting taxpayers' rights to timely judicial review and preventing administrative delay from prejudicing their ability to contest unlawful tax assessments.