Process: 66/2015-T

Date: September 3, 2015

Tax Type: IMI

Source: Original CAAD Decision

Summary

This arbitral decision addresses whether the CAAD (Portuguese Tax Arbitration Center) has jurisdiction to rule on IMI (property tax) exemption disputes and whether non-resident property owners in China retain IMI exemption after acquiring units in a certified tourist resort. The Tax Authority (AT) raised a jurisdictional exception, arguing that CAAD lacks competence to hear exemption recognition matters under Articles 2(1)(a) and 4 of LRAT. The Tribunal rejected this exception, clarifying that the case concerns transmission of an existing objective exemption previously granted, not initial exemption recognition. Three non-resident taxpayers purchased autonomous units within 'Aldeamento Turístico F…' in late 2013 from the original owner (Company G…), which had been granted IMI exemption for 2010-2016 under Article 47 of the Tax Benefits Statute (EBF) following the award of perpetual tourist utility in December 2010. The AT issued IMI assessments for 2013, disregarding the exemption. The requesters argued that Article 47 EBF provides an objective exemption attached to properties integrated in tourist utility enterprises, meaning the exemption 'follows the property' regardless of ownership changes. Since tourist utility was never revoked and the units remained operationally integrated in the resort, they claimed automatic continuation of the exemption without requiring new applications. The Tribunal held it had material competence under LRAT to decide the dispute, finding that challenges to tax assessments denying previously-recognized exemptions fall within arbitral jurisdiction, distinguishing this from initial exemption recognition procedures which remain with tax administration.

Full Decision

ARBITRAL DECISION

I. REPORT

  1. A…, taxpayer no. …, divorced, resident in …, no. …, ... …, …, …, …, in the People's Republic of China, B…., taxpayer no. …, married under the regime of communion of acquired property with C…, taxpayer no. …, resident in …, …, …, district of …, Beijing, in the People's Republic of China and D…, taxpayer no. …, married under the regime of communion of acquired property with E…, taxpayer no. …, resident in …, …, …, …, district of …, …, in the People's Republic of China, hereinafter designated as Requesters, came, pursuant to the combined provisions of articles 2 and 10 of Decree-Law no. 10/2011, of 20 January (Legal Regime of Arbitration in Tax Matters, hereinafter referred to only as LRAT), to request the constitution of a single Arbitral Tribunal.

  2. The Respondent is the Tax and Customs Authority (hereinafter referred to as TCA).

  3. The request for arbitral pronouncement is made against the Property Tax (IMI) assessment acts relating to the year 2013, dated 09/03/2014, concerning the autonomous units that form an integral part of the "Aldeamento Turístico F…" enterprise, described with the letters "AS", whose owner is Requester A…, and with the letters "AX" and "X", whose co-owners are Requesters B… and D….

  4. The Requesters request the annulment of the assessment acts identified above and the reimbursement of the amounts paid, as well as the payment of compensatory interest, considering that the said properties benefit from Property Tax (IMI) exemption under article 47 of the Tax Benefits Statute (TBS).

  5. The Respondent opted for not appointing an arbitrator.

  6. Pursuant to the provisions of paragraph a) of no. 2 of article 6 and paragraph b) of no. 1 of article 11 of the LRAT, as amended by article 228 of Law no. 66-B/2012, of 31 December, the Deontological Council appointed the arbitrator of the arbitral tribunal, who communicated acceptance of the appointment within the applicable deadline.

  7. The parties were notified of this appointment, having expressed no intention to challenge the appointment of the arbitrator, pursuant to the combined provisions of article 11, no. 1, paragraphs a) and b) of the LRAT and articles 6 and 7 of the Code of Ethics of the CAAD.

  8. Thus, in accordance with the provision of paragraph c) of no. 1 of article 11 of the LRAT, as amended by article 228 of Law no. 66-B/2012, of 31 December, the single arbitral tribunal was constituted on 15-04-2015.

  9. The Respondent presented a response, with defense by exception and by challenge, in which it contends the inadmissibility of the request for arbitral pronouncement.

  10. By order of 08-07-2015, the Tribunal decided to dispense with the holding of the meeting provided for in article 18 of the LRAT and to dispense with the presentation of final arguments.

On the exception raised by the Respondent

  1. The Respondent presented a defense by exception, in which it contends the incompetence of the Arbitral Tribunal to hear matters relating to the Property Tax exemption, requesting, cautiously and without prejudice, that the tribunal refrain from "hearing any questions relating to the consideration of the exemption provided for in article 47 of the TBS in the present case and ordering the withdrawal of all articles of the request for arbitral pronouncement relating to the consideration of this matter" (art. 15 of the Response).

  2. The alleged incompetence of the Arbitral Tribunal arises, according to the Respondent, from the provisions of paragraph a) of no. 1 of article 2 and article 4 of the LRAT, which permit the conclusion that "knowledge of matters relating to the recognition of tax exemptions are not within the scope of the material competence of the Arbitral Tribunal" (art. 12 of the response).

  3. The Respondent writes that "[the] incompetence of the tribunal constitutes a dilatory exception of suo moto knowledge in accordance with article 576 and paragraph a) of article 577 of the Civil Procedure Code applicable ex vi article 29, no. 1, paragraphs a) and e) of the LRAT, which is hereby requested".

  4. The Requesters, having been notified to, if they wished, present a written response to the defense by exception, did not do so.

  5. With a view to the decision on the exception, the Tribunal considers that the subject matter of the case is not a question of recognition of an exemption, but rather a question of the transmission of an objective exemption to which the Requesters consider themselves entitled, which was disregarded by the Respondent, resulting from this the execution of the Property Tax assessment acts now being challenged.

  6. Thus, the exception is dismissed and this Tribunal is held to be materially competent to resolve the dispute and is regularly constituted, in accordance with articles 2, no. 1, paragraph a), 5 and 6, no. 1, of the LRAT.

  7. Regarding the joinder of claimants, the Tribunal considers the prerequisites for its admission to be met, as defined in art. 104 of the Code of Procedure and Tax Procedure – identity of the tax; identity of the competent body to decide; identity of the factual and legal grounds invoked.

  8. The Parties have legal personality and capacity and are legitimate (arts. 4 and 10, no. 2, of the LRAT and art. 1 of Ministerial Order no. 112-A/2011, of 22 March).

  9. No nullity is apparent.

II. FACTUAL MATTERS

a. Proven Facts

  1. The following facts are considered proven:

20.1. By Order of …/2010 of 31.12.2010 of the Secretary of State for Tourism, tourist utility was awarded in perpetuity to the tourist enterprise "Aldeamento Turístico F…".

20.2. On 07/01/2011 the company G… – Tourist Enterprises, S.A. filed a request for exemption relating to the property record … of the parish of …, which was granted for the period 2010 to 2016 by Order of 10/01/2011.

20.3. On 26 November 2013, the herein Requester, A…, acquired from G… by public deed, the autonomous unit identified by the letters "AS".

20.4. On 23 December 2013, the herein Requesters, B… and D…, acquired from G…, also by public deed, the autonomous units identified by the letters "AX" and "X".

20.5. The said units form an integral part of the "Aldeamento Turístico F…" enterprise.

20.6. The Requesters were notified by the TCA to pay the first installment of the Property Tax relating to the year 2013, levied on the properties described above, payment of which was made on 29/04/2014.

20.7. On 01/09/2014 the Requesters filed the present request for arbitral pronouncement.

20.8. The Requesters were subsequently notified to pay the second installment of the Property Tax relating to the year 2013, which was paid on 27/11/2014.

b. Unproven Facts

  1. Of the facts relevant to the decision of the case, those not stated in the facts described above were not proven.

c. Reasoning for the Decision on Factual Matters

  1. The facts were considered proven based on documentary evidence.

III. LEGAL MATTERS

  1. The question to be decided consists in determining whether the Requesters are entitled to the Property Tax exemption provided for in art. 47 of the Tax Benefits Statute (TBS).

  2. The Requesters state in the Initial Petition, in summary, that we are dealing with an objective exemption, which aims to benefit "properties integrated in enterprises to which tourist utility has been awarded", so that, the exemption having been recognized to the previous owner, and the objective situation of the units acquired in the meantime by the herein Requesters remaining unchanged, the exemption is maintained.

  3. According to the Requesters, "as it is an objective exemption, the exemption 'follows' the property, so it is not necessary for there to be initiative on the part of the acquirer".

  4. The Requesters further invoke the absence of an order revoking the deed conferring tourist utility, as well as the fact that the units were never withdrawn from the unitary operation of the enterprise, in addition to the fact that the Property Tax exemption does not derive directly from article 20 of Decree-Law no. 423/83, of 5 December but from no. 1 of article 47 of the TBS.

  5. The Requesters thus consider that the Property Tax assessments now being contested are tainted by illegality, and accordingly request the reimbursement of the improperly paid tax plus compensatory interest.

  6. The Respondent presented a response, in which it contends, in summary, that "the Requesters acquired the respective units not with a view to installation but to operation", and that the "Property Tax exemption is only justified with respect to those who proceed with the installation of the enterprise and put it on the market and not in relation to all those who use and operate it, even through the purchase of its units".

  7. The Respondent's understanding is based on a combined interpretation of art. 47 of the TBS and the provisions contained in Decree-Law no. 423/83, of 5 December, which, according to the Respondent, is the one adopted in the jurisprudence-standardizing Judgment no. 3/2013, of 23 January, published in the Official Journal of 4 March 2013, and in various arbitral decisions.

  8. The Respondent further adds that "under article 15 of the TBS, tax benefits are not transmissible inter vivos, so the thesis of the Requesters that the request for exemption granted to the investment promoter could be transmitted to them is unfounded".

  9. In this way, the Respondent contends the total inadmissibility of the request.

  10. For the decision, the norm contained in article 47 of the TBS is decisive, whose text is as follows:

"Article 47

Properties integrated in enterprises to which tourist utility has been awarded

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

2 - Properties integrated in enterprises to which tourist utility has been awarded provisionally benefit from the exemption provided for in the preceding number, from the date of the award of tourist utility, provided that the deadline set for the opening or reopening to the public of the enterprise or for the completion of the works has been observed.

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

4 - In the cases provided for in this article, the exemption is recognized by the chief finance officer of the area of the property's location, in a duly documented application, which must be submitted by the taxpayers within 60 days counted from the date of publication of the order awarding tourist utility.

5 - If the application is submitted beyond the deadline referred to in the preceding number, the exemption begins as from the immediate year, inclusive, of its submission, ceasing, however, in the year in which it would have ended had the application been submitted in time.

6 - In all aspects not regulated in the present article or in the Municipal Property Tax Code, the provisions of Decree-Law no. 423/83, of 5 December shall apply, with the necessary adaptations."

  1. No. 1 of art. 47 of the TBS provides for an objective exemption, which takes into account the situation of the property – "properties integrated in enterprises to which tourist utility has been awarded" – and not any quality of the taxpayer.

  2. Contrary to what occurs with the text of no. 1 of art. 20 of Decree-Law no. 423/83, the legislator does not make any requirement in no. 1 of art. 47 of the TBS regarding the use of the property, so it makes no sense in this context to develop the question of the distinction between installation and operation.

  3. The question sub judice is therefore distinct from that which the Supreme Administrative Court ruled upon in the jurisprudence-standardizing Judgment no. 3/2013, of 23 January, published in the Official Journal of 4 March 2013 – there the interpretation and application of the provision contained in no. 1 of art. 20 of Decree-Law no. 423/83 were at issue, relating to the exemption of transfer tax (currently, IMT) and inheritance and donation tax (currently, Stamp Duty).

  4. In arbitral decision no. 342/2014-T, it is indeed stated that "contrary to what it does in no. 1 of art. 20 of Decree-Law no. 423/83, the legislator does not make the exemption in the case of Property Tax dependent on the use given to the acquired properties", adding that "if the legislator makes this distinction, it is not for the interpreter to disregard it".

  5. As Carlos Paiva and Mário Januário state, "as long as the requirements inherent in qualifying an enterprise as having tourist utility are met, under Decree-Law no. 423/83, of 5 December, the properties integrated in them are capable of benefiting from Property Tax exemption, in accordance with the provision of the aforementioned article 47 of the TBS, as long as the prerequisites listed in that decree are maintained [taking into account the possibility of revocation of tourist utility" (Tax Benefits in Property Tax, Coimbra, Almedina, 2014, p. 102).

  6. Since tourist utility was not revoked, the properties with that qualification continue to benefit from the Property Tax exemption provided for in art. 47 of the TBS even if their ownership was transferred in the meantime.

  7. It should be noted that the inter vivos transmission of objective tax benefits that are inseparable from the legal regime applicable to certain goods is expressly admitted by no. 2 of art. 15 of the TBS.

  8. Thus, the Requesters did not need to request the recognition of an exemption that had already been recognized for the properties in question.

  9. The reference made in no. 6 of art. 47 of the TBS to Decree-Law no. 423/83 aims to subject the recognition and maintenance of the exemptions provided for in art. 47 of the TBS to the grant of tourist utility, which must be done in the manner defined in that Decree-Law.

  10. This reference does not aim to subject the exemptions provided for in art. 47 of the TBS to the requirements defined in Decree-Law no. 423/83 for the tax benefits provided for in this decree.

  11. Thus, the provisions of art. 21 of Decree-Law no. 423/83 are only applicable to the tax benefits provided for in this decree.

  12. In conclusion, the properties in question continue to benefit from the Property Tax exemption provided for in art. 47 of the TBS until the end of the 7-year period, so the Property Tax assessment relating to 2013 concerning those properties is tainted by illegality.

  13. Concluding that the assessment acts contested in the case are illegal, the Tribunal must decide a second issue, which concerns whether or not compensatory interest is owed to the Requesters. No. 1 of art. 43 of the General Tax Law provides that:

"[c]ompensatory interest is owed when it is determined, in administrative appeal or judicial challenge, that there was an error attributable to the services resulting in payment of the tax debt in an amount higher than legally due".

  1. It is considered that "[the] error attributable to the services that made the assessment is demonstrated when administrative appeal or judicial challenge of that same assessment proceeds and the error is not attributable to the taxpayer" (DIOGO LEITE DE CAMPOS, BENJAMIM SILVA RODRIGUES, JORGE LOPES DE SOUSA, General Tax Law. Annotated and Commented, 4th ed., Lisbon, 2012, p. 342).

  2. The law further determines, in art. 100 of the General Tax Law, that:

"The tax administration is obliged, in case of total or partial success of administrative appeals or legal proceedings in favor of the taxpayer, to the immediate and full reconstitution of the situation that would exist if the illegality had not been committed, including the payment of compensatory interest, in accordance with the terms and conditions provided by law."

  1. As stated in the Judgment of the Supreme Administrative Court of 11/02/2009, case no. 1003/08:

"Having the legislator adopted compensation in the form of compensatory interest, following an order annulling an assessment act, presuming the patrimonial harm derived from the deprivation of the amount paid following an illegal assessment act, the interpretation of art. 100 of the General Tax Law in accordance with the Constitution is that it recognizes the right to compensatory interest from the date when the deprivation of the illegally assessed amount occurred and not only from the termination of the deadline for execution of the annulling decision."

  1. In the present case we have Property Tax assessments based on error attributable to the services, resulting in improper payment of tax installments by the Requesters, so they are recognized the right to compensatory interest.

  2. In accordance with the provisions of no. 1 of art. 61 of the Code of Procedure and Tax Procedure (CPPT), "[i]nterest is calculated from the date of improper payment of the tax until the date of processing of the respective credit note, in which it is included".

IV. DECISION

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

a) To uphold the request for annulment of the assessment acts challenged, with all legal effects;

b) To uphold the request for condemnation of the Respondent to payment of compensatory interest, at the legal rate, in accordance with the terms provided in articles 43 of the General Tax Law and 61 of the Code of Procedure and Tax Procedure.

V. CASE VALUE

Correction is made to the case value indicated by the Requesters in the request for arbitral pronouncement (€ 627.56), since the claim concerns the assessment acts and not the payment documents relating to one of the tax installments. Thus, the case value is fixed at € 839.44, which corresponds to the total value of the assessments challenged, in accordance with the provisions of article 97-A, no. 1, paragraph a), of the Code of Procedure and Tax Procedure and article 3, no. 2, of the Regulation of Costs in Tax Arbitration Proceedings.

VI. COSTS

Pursuant to art. 22, no. 4, of the LRAT, the costs are fixed at € 306.00, in accordance with Table I annexed to the Regulation of Costs in Tax Arbitration Proceedings, to be borne by the Respondent.

Lisbon, 03 September 2015

The Arbitrator,

Paulo Nogueira da Costa

Frequently Asked Questions

Automatically Created

Can the CAAD Arbitral Tribunal rule on IMI property tax exemption disputes in Portugal?
Yes, the CAAD Arbitral Tribunal has jurisdiction to rule on IMI exemption disputes when the case involves the application or denial of a previously-recognized exemption rather than initial exemption recognition. In Process 66/2015-T, the Tribunal rejected the Tax Authority's jurisdictional exception, clarifying that under Article 2(1)(a) of LRAT (Legal Regime of Tax Arbitration), challenges to IMI assessment acts that disregard existing exemptions fall within the Tribunal's material competence. The key distinction is between recognizing a new exemption (administrative competence) and adjudicating whether an existing exemption was correctly applied or transmitted (arbitral competence). When taxpayers challenge assessment acts claiming entitlement to exemptions under the Tax Benefits Statute, CAAD has full jurisdiction to decide the merits.
What are the conditions for IMI exemption under Article 47 of the Estatuto dos Benefícios Fiscais (EBF) for tourist developments?
Under Article 47 of the Estatuto dos Benefícios Fiscais (EBF), IMI exemption for tourist developments requires: (1) the property must be integrated into a tourist enterprise that has been officially awarded 'tourist utility' (utilidade turística) by the competent authority (Secretary of State for Tourism); (2) the award of tourist utility must be in force and not revoked; (3) the property must remain operationally integrated within the tourist enterprise. In Process 66/2015-T, the Aldeamento Turístico F… received perpetual tourist utility by Ministerial Order dated December 31, 2010, and Company G… was granted IMI exemption for 2010-2016. The exemption is objective in nature, meaning it attaches to the property itself rather than the property owner, and therefore should transmit automatically to subsequent purchasers as long as the tourist utility remains valid and the property continues as part of the certified tourist operation.
How do non-resident property owners in Portugal challenge IMI tax assessments through tax arbitration?
Non-resident property owners in Portugal challenge IMI tax assessments through CAAD tax arbitration by filing a request under the LRAT (Decreto-Lei n.º 10/2011, of January 20). In Process 66/2015-T, three Chinese residents successfully initiated arbitration against IMI assessments for 2013. The procedure includes: (1) submitting a written request identifying the contested assessment acts and legal grounds; (2) paying required fees; (3) establishing tax domicile in Portugal or appointing a representative; (4) meeting standing requirements under Articles 4 and 10(2) of LRAT. Non-residents have the same procedural rights as residents. Multiple requesters can join proceedings when there is identity of tax, competent authority, and factual/legal grounds (Article 104 CPPT). The Tax Authority may respond and appoint an arbitrator or let CAAD's Deontological Council appoint one. Arbitration typically concludes within six months, offering faster resolution than traditional judicial review.
What happens when the Tax Authority raises a jurisdiction exception in CAAD arbitration proceedings?
When the Tax Authority raises a jurisdiction exception in CAAD arbitration, the Tribunal must address it as a preliminary matter before proceeding to the merits. In Process 66/2015-T, the AT invoked incompetence under Articles 2(1)(a) and 4 of LRAT, arguing exemption recognition falls outside arbitral jurisdiction. The Tribunal treated this as a dilatory exception of mandatory consideration (exceção dilatória de conhecimento oficioso) under Articles 576 and 577(a) of the Civil Procedure Code, applicable via Article 29(1) of LRAT. The requesters were notified and given opportunity to respond. After analysis, the Tribunal dismissed the exception, holding that challenges to assessment acts denying exemptions differ from initial exemption recognition procedures. When a jurisdiction exception is upheld, the case is dismissed without prejudice to pursuing administrative or judicial remedies. When dismissed (as here), proceedings continue normally. This preliminary ruling protects both parties' procedural rights and ensures CAAD operates within its legal mandate while maximizing access to arbitral justice.
Are properties within certified tourist resorts (aldeamentos turísticos) eligible for IMI tax exemption in Portugal?
Yes, properties within certified tourist resorts (aldeamentos turísticos) in Portugal are eligible for IMI tax exemption under Article 47 of the Tax Benefits Statute when the resort has been officially awarded 'tourist utility' (utilidade turística). In Process 66/2015-T, autonomous units within Aldeamento Turístico F… qualified for exemption following the December 2010 award of perpetual tourist utility and a January 2011 ministerial order granting IMI exemption for 2010-2016. The exemption is objective and real in nature—it attaches to the property itself rather than the owner—meaning it transmits automatically to subsequent purchasers without requiring new applications, provided the tourist utility remains valid and the units continue operating as part of the integrated resort. When non-resident buyers acquired units in late 2013 from the original exempt owner, they argued successfully that the exemption should continue automatically. The Tax Authority's position that exemptions don't transmit was challenged as contrary to the objective nature of Article 47 EBF benefits for tourist enterprises.