Process: 675/2014-T

Date: April 27, 2015

Tax Type: Valor do pedido:

Source: Original CAAD Decision

Summary

CAAD Process 675/2014-T addressed the legality of compensatory interest charges totaling €25,860.13 on IMT (Municipal Tax on Onerous Real Estate Transfers) assessments against a closed real estate investment fund with restricted subscription. The fund acquired multiple urban properties in 2007, claiming total IMT exemption under Article 46 of the Statute of Tax Benefits. However, following a 2013 tax inspection, the Tax Authority determined that due to amendments introduced by Law 53-A/2006 (2007 State Budget), funds established after November 1, 2006 with both qualified and non-qualified investors only qualified for 50% exemption, not total exemption. While the fund paid the reassessed IMT principal of €178,350, it challenged the compensatory interest through tax arbitration. The fund argued that compensatory interest requires culpable delay attributable to the taxpayer under Article 35(1) of the General Tax Law and Article 33(1) of the IMT Code. The fund maintained it acted in good faith with reasonable interpretation of complex transitional provisions in Law 53-A/2006, which created ambiguity regarding the exemption regime applicable to funds established between the law's effective dates. The fund contended that even if its tax position was ultimately incorrect, the absence of culpability due to reasonable reliance on the law as understood at the time precluded compensatory interest charges. The arbitral tribunal was constituted on December 10, 2014, with both parties waiving the oral hearing, proceeding directly to written submissions for decision on the legality of the interest assessment.

Full Decision

ARBITRAL DECISION

CAAD: Tax Arbitration

Case No. 675/2014-T

I. REPORT

A…, Tax Identification Number …, managed and represented by B… - …, Ltd., with registered office at Avenue …, No. …, …, in Lisbon, registered with the Commercial Registry of Lisbon under single registration number and legal entity number …, with share capital of €600,000.00 (six hundred thousand euros), filed a request with the Administrative Arbitration Centre (CAAD), on 12 September 2014, for the constitution of an arbitral tribunal in tax matters, in accordance with the provisions of Article 10, nos. 1 and 2 of Decree-Law No. 10/2011, of 20 January (Legal Framework for Tax Arbitration "RJAT"), in which the Tax and Customs Authority (AT) is the Respondent, with a view to declaring the illegality and consequent annulment of the assessment acts for Municipal Tax on Onerous Real Estate Transfers (IMT), relating to the year 2007, with respect to default interest, in the total amount of €25,860.13 (twenty-five thousand, eight hundred and sixty euros and thirteen cents).

The Claimant opted not to appoint an arbitrator.

The request for constitution of an arbitral tribunal was accepted by the President of CAAD on 12 September 2014 and automatically notified to the AT on the same date.

The Undersigned was appointed by the President of the Deontological Council of CAAD as sole arbitrator of an arbitral tribunal, in accordance with the provisions of Article 6 of the RJAT.

The Undersigned communicated acceptance of the appointment to the President of the Deontological Council of CAAD within the legal period, in accordance with the provisions of Article 4 of the CAAD Code of Conduct.

The Parties were notified of the Undersigned's appointment on 29 October 2014, in accordance with Article 11, No. 1, paragraphs a) and b) of the RJAT, and did not object thereto.

The sole arbitral tribunal was thus regularly constituted on 10 December 2014, in accordance with the provisions of paragraph c) of No. 1 of Article 11 of the RJAT.

The AT was notified, by arbitral order of 10 December 2014, to present a response within 30 (thirty) days.

The AT presented its response on 23 January 2015, requesting therein a waiver of the hearing referred to in Article 18 of the RJAT.

By order of 10 March 2015, the Arbitral Tribunal determined notification of the Parties to submit their comments on any potential exception, on the one hand, and on the request for waiver of the hearing referred to in Article 18 of the RJAT, on the other. It further indicated that, in the absence of opposition to such waiver, it would decide on any potential exception in the final decision.

The Claimant presented a response on 19 March 2015, wherein it commented on the matter of any potential exception and indicated it did not oppose the waiver of the hearing referred to in Article 18 of the RJAT.

The Arbitral Tribunal is materially competent, in accordance with Article 2, No. 1, paragraph a) of the RJAT.

The Parties possess legal personality and capacity and are legally entitled (Articles 4 and 10, No. 2 of the RJAT and Article 1 of Order No. 112-A/2011, of 22 March).

The joinder of claims is admissible, as the requirements established in Article 3, No. 1 of the RJAT are met.

The proceeding does not suffer from defects that would invalidate it.

II. CLAIMANT'S REQUEST

The Claimant submitted a request for an arbitral pronouncement with a view to declaring the illegality and consequent annulment of the IMT assessment acts for the year 2007, with respect to default interest. Such acts were notified through Official Notices Nos. …, of 9 May 2014, from the Tax Office of Lisbon …, which determined the amount of default interest of €1,488.62 (one thousand, four hundred and eighty-eight euros and sixty-two cents) and No. …, of 14 May 2014, which determined the amount of default interest of €24,371.51 (twenty-four thousand, three hundred and seventy-one euros and fifty-one cents).

The Claimant supports its request, in summary, in the following terms:

  1. The Claimant is a closed real estate investment fund (REIF) with restricted subscription, authorized by resolution of the Governing Board of the Securities Commission, dated 17 October 2006, having been constituted and commenced operations on 16 April 2007.

  2. Since its constitution, and until 22 February 2011, the Claimant had two participants, one qualified and one non-qualified (in the terms and for the purposes provided in Articles 30, 317 and 317-A of the Securities Code).

  3. In 2007, the Claimant acquired several urban real properties, with IMT not being assessed on those acquisitions.

  4. The Claimant benefited from total exemption from IMT under the then Article 46 of the Statute of Tax Benefits (STB), which was, in accordance with the legal provisions then in force, recognized by the respective notary.

  5. The Claimant was subject to internal tax inspection, of limited scope, for the year 2007, in accordance with Service Order No. OI2013 ….

  6. Such inspection was based on (as indicated in its final report), "the amendments, under Law No. 53-A/2006 of 20/12 (State Budget for 2007), introduced in Article 46 of the Statute of Tax Benefits (STB), which changed the exemption regime to 50%, relating to the rates of Municipal Property Tax and Municipal Tax on Onerous Real Estate Transfers (IMT) that benefit real properties included in Mixed or Closed Real Estate Investment Funds (REIF) with Restricted Subscription".

  7. As a result of such inspection procedure, the AT considered that the Claimant did not meet the conditions to benefit from total IMT exemption on the real property acquisitions made in 2007, because the last legislative amendment determined that REIFs with restricted subscription established after 1 November 2006 and composed of qualified and non-qualified investors could not benefit from total IMT exemption, but only from partial exemption.

  8. Consequently, the Claimant was notified of IMT assessments and default interest, in the total amount of €204,210.13 (two hundred and four thousand, two hundred and ten euros and thirteen cents), and proceeded to pay the same in full.

  9. Nevertheless, the Claimant considers that default interest, in the amount of €25,860.13 (twenty-five thousand, eight hundred and sixty euros and thirteen cents) is not due, as the legal requirements for its assessment are not met.

  10. The requirement to pay default interest depends on the delay in assessment being attributable to the taxpayer, on the one hand, and such delay resulting from culpable conduct of the same, on the other, as is clear from the provisions of Article 35, No. 1 of the General Tax Law (GTL) and Article 33, No. 1 of the IMT Code.

  11. Citing doctrine, the Claimant also considers that even if there is erroneous conduct by the taxpayer that causes the delay in assessment, this does not give rise to liability if the taxpayer acted in good faith and the error is excusable, as its position was reasonable.

  12. The Claimant considers there was no culpability on its part in the delay in IMT assessment.

  13. Until the publication of Law No. 53-A/2006, of 29 December, closed REIFs benefited from total IMT exemption.

  14. After the publication of that Law, Article 46 of the STB acquired a new No. 2, establishing that "real properties included in mixed or closed real estate investment funds with restricted subscription by non-qualified investors (…) do not benefit from the exemptions referred to in the preceding number, being the rates of IMI and IMT reduced to half".

  15. Law No. 53-A/2006, of 29 December also established a transitional regime for mixed or closed REIFs with restricted subscription: the new No. 2 would apply only to mixed or closed REIFs with restricted subscription by non-qualified investors that (i) were established after 1 November 2006; (ii) carried out capital increases after 1 November 2006, or (iii) were established before 1 November 2006, but whose participation units were, on that date, held exclusively by non-qualified investors or by financial institutions on their behalf.

  16. Thus, in accordance with this transitional regime, the existence of a single qualified investor was sufficient for total IMT exemption to continue to apply.

  17. Although this transitional regime is not applicable to the Claimant, which was only established in 2007, the fact is that there were doubts as to the application of No. 2 of Article 46 of the STB in force at the date of the facts, to the extent that it did not expressly provide whether, in order to benefit from the 50% exemption, closed REIFs with restricted subscription should be subscribed exclusively by non-qualified investors.

  18. Consequently, the Claimant could not reasonably know that No. 2 of Article 46 of the STB (and thus, IMT exemption would be 50%) was applicable to it rather than No. 1 of the same article (which provided for total exemption).

  19. The Claimant benefited from total exemption, but had no intention of taking advantage of a tax benefit to which it was not entitled. It merely considered, reasonably, that it was equally entitled to it.

  20. There was no culpability on the part of the Claimant, and there was no culpable omission of a duty of care.

  21. The interpretation of the applicable law was, in fact, ambiguous, which doctrine itself came to recognize.

  22. Even the AT requested an opinion on the matter from the Tax Studies Centre.

  23. Thereby demonstrating that the interpretation regarding the scope of the norm in question was far from being settled, clear and unanimous, with doubt and uncertainty persisting.

  24. Given that the AT's position was only defined, also, in 2010 – thus the presupposition of the Claimant's culpability in the delay of IMT assessments does not exist, and default interest cannot, consequently, be due.

  25. Citing doctrine and CAAD jurisprudence, the Claimant concludes that it has conclusively demonstrated the absence of culpability, and the legal requirements for default interest to be assessed are not met.

III. RESPONDENT'S RESPONSE

The Respondent presented its Response, alleging, succinctly, the following:

  1. Jurisprudence understands that well-founded doubt raised by the taxpayer regarding the factual prerequisites of default interest assessment is resolved in favor of the taxpayer, applying, as in criminal law, the principle "in dubio pro reo", notwithstanding the absence of a sanctionary nature of interest.

  2. This principle is not, however, applicable to mere error of law by the taxpayer in the interpretation and application of legal norms that define its accessory obligations, extending only to cases where the AT acts within the scope of discretionary powers.

  3. In accordance with Article 6 of the Civil Code, ignorance of the law avails no one.

  4. Legal norms are applicable to their subjects, regardless of knowledge or lack of knowledge of their content by the latter.

  5. Error in the interpretation and application of tax law cannot, in any case, constitute a cause excluding the right to default interest.

  6. This would violate the necessary unity of the legal order.

  7. Thus, the taxpayer's negligence would no longer be presumed through the non-performance of a reporting duty, instead depending on a proper procedure in which the taxpayer would always have to be heard first.

  8. And there, the taxpayer could allege against the default interest assessment any publications by tax consultants, alleging, even without substantiation, that the interpretation and application of the law on which the assessment was based is questionable.

  9. The taxpayer always has at its disposal an ample array of means to be clarified on its specific tax situation, in particular the request for binding information, which may even prevent default interest assessment if the AT does not respond within the legal period.

  10. Such norms are only applicable to taxpayers who, having acted in accordance with a plausible interpretation and in good faith with the law, have requested the provision of binding information.

  11. Not being applicable to third parties not requesting binding information, who did not seek to clarify their doubts.

  12. The wording of the then Article 46, No. 2 is explicit in the sense that the tax benefit of No. 1 does not apply to REIFs held by non-qualified investors.

  13. For this benefit to cease to apply, it is not necessary that the funds be held exclusively or predominantly by non-qualified investors.

  14. If it were, it would be very easy for the funds to completely circumvent the provision of Article 46, No. 2 of the STB, merely by transferring some participation units to qualified investors.

  15. The Claimant relied on an interpretation of notorious risk of the law, incompatible with the prudence of a "bonus pater familiae".

  16. And nothing prevents the requirement of default interest the fact that the non-assessment of IMT was sanctioned by the notary, who has no competence to do so.

  17. The delay in the assessment of the tax is attributable to the Claimant.

  18. The AT has to demonstrate the taxpayer's error, and such proof may result from natural presumptions, admissible in case of negligence, such as those resulting, in this case, from the non-performance of the taxpayer's reporting duties within the legal period.

  19. The assessments in question did not violate any legal or constitutional provision, and should be upheld in the legal order.

IV. ISSUES TO BE DECIDED

Considering the facts and legal matters contained in the request for an arbitral pronouncement presented by the Claimant and the Respondent's Response, the only issue to be decided by the Arbitral Tribunal is whether default interest is due for the delay in the assessment of IMT on the transfer of the real properties identified in favor of the Claimant.

V. FACTUAL MATTERS

With relevance to the appraisal of the request, the following facts are deemed proven, based on the documents attached to the file, not contested by the Respondent:

a. The Claimant is a closed real estate investment fund (REIF) with restricted subscription, authorized by resolution of the Governing Board of the Securities Commission, dated 17 October 2006, having been constituted and commenced operations on 16 April 2007.

b. Since its constitution, and until 22 February 2011, the Claimant had two participants, one qualified and one non-qualified (in the terms and for the purposes provided in Articles 30, 317 and 317-A of the Securities Code).

c. The Claimant acquired, on 16.4.2007, the urban property located at Street …, …, …, municipality of Cascais, registered in the property register under article ….

d. The Claimant acquired, on 28.12.2007, autonomous unit G of the urban property located at Street …, lot … and Avenue …, municipality of Lisbon, registered in the property register under article … (current …).

e. The Claimant did not assess IMT on such acquisitions, having benefited from total exemption from this tax under the then Article 46, No. 1 of the STB.

f. The notaries who executed the respective public deeds considered that the Claimant was exempt under that provision.

g. The Claimant was subject to internal tax inspection, of limited scope, for the year 2007, in accordance with Service Order No. OI2013 ….

h. Such inspection had as its motivation "the amendments, under Law No. 53-A/2006 of 20/12 (State Budget for 2007), introduced in Article 46 of the Statute of Tax Benefits (STB), which changed the exemption regime to 50%, relating to the rates of Municipal Property Tax and Municipal Tax on Onerous Real Estate Transfers (IMT) that benefit real properties included in Mixed or Closed Real Estate Investment Funds (REIF) with Restricted Subscription".

i. As a result of such inspection procedure, the AT considered that the Claimant did not meet the conditions to benefit from total IMT exemption on the real property acquisitions made in 2007, because the last legislative amendment determined that REIFs with restricted subscription established after 1 November 2006 and composed of qualified and non-qualified investors could not benefit from total IMT exemption, but only from partial exemption.

j. The Claimant was notified of Official Notice No. …, of 9.5.2014, issued by the Tax Office of Lisbon … to pay, within 30 days from the signature of the acknowledgment of receipt, IMT in the amount of €5,850.00 (five thousand, eight hundred and fifty euros) and default interest in the amount of €1,488.62 (one thousand, four hundred and eighty-eight euros and sixty-two cents);

k. The Claimant received such Official Notice on 14 May 2014.

l. The Claimant was notified of Official Notice No. …, of 14.5.2014, issued by the Tax Office of Cascais …, to pay, within 30 days from the signature of the acknowledgment of receipt, IMT in the amount of €90,000.00 (ninety thousand euros) and default interest in the amount of €24,371.51 (twenty-four thousand, three hundred and seventy-one euros and fifty-one cents);

m. The Claimant received such Official Notice on 16 May 2014.

n. The Claimant proceeded to pay the IMT and default interest in accordance with the Official Notices referred to in j. and l. above.

o. In 2010, a doctrinal note was published by the AT regarding case 2010… – IVE 547 – with an approving Dispatch dated 2.6.2010 of the Deputy Legal Director-General, referring to the interpretation of the current Article 49 of the STB (then Article 46) regarding the exemption applicable to closed REIFs with restricted subscription by non-qualified investors.

p. In 2010, a doctrinal note was published by the AT regarding case 2010… – IVE 548 – with an approving Dispatch dated 2.6.2010 of the Deputy Legal Director-General substituting the Director-General of Taxes, referring to the interpretation of the current Article 49 of the STB (then Article 46) regarding the exemption applicable to closed REIFs with restricted subscription by non-qualified investors.

The conviction regarding the facts deemed proven was based on documentary evidence attached, whose authenticity and correspondence to reality were not contested by the Respondent.

There are no other facts, with relevance to the proceeding, that are not deemed proven.

VI. LEGAL MATTERS

A. Preliminary Matter: Timeliness of the Claimant's Request

The Claimant indicates, in Items 5 to 11 of its request for arbitral pronouncement, that in accordance with Article 10, No. 1, paragraph a) of the RJAT, the request for constitution of an arbitral tribunal is submitted within 90 days counted from the facts provided in No. 1 of Article 102 of the Tax Procedure and Process Code ("TPPC") (in this case, from paragraph a) of No. 1 of Article 102 of the TPPC). After indicating the dates relevant for this purpose, the Claimant indicates, in Item 10 of its request for arbitral pronouncement, that it should have been presented by 11.09.2014.

Considering that, in accordance with consultation of the file in the SGP, the request was filed with CAAD on 12.9.2014, the Arbitral Tribunal issued an order on 10 March 2015, notifying the Parties to submit their comments on the issue, as it could constitute an exception to be decided.

In response, the Claimant submitted a request on 19 March 2015, commenting on what was exposed.

In these terms, the Arbitral Tribunal now decides on the matter of any potential exception, as identified.

As indicated in V, j. and k., Official Notice No. …, of 9.5.2014, issued by the Tax Office of Lisbon …, was received by the Claimant on 14 May 2014. The deadline for voluntary payment (30 days) would end on 13 June 2014. 13 June is a municipal holiday in Lisbon, the municipality of the Claimant's registered office and of the Tax Office issuing that notice.

When the deadline coincides with a day on which the service before which the action is to be performed is not open to the public, it is postponed to the first following business day, in accordance with paragraph f) of the current Article 87 of the Administrative Procedure Code, applicable supplementarily to tax procedure, by force of the provision in Article 2, paragraph d) of the TPPC. The deadline for voluntary payment was thus postponed to 16 June 2014.

Thus, in cases where the deadline for voluntary payment is postponed to the first following business day, the period provided in paragraph a) of No. 1 of Article 102 of the TPPC shall be counted from the business day to which the deadline for voluntary payment is postponed.

Consequently, the 90-day period provided in that provision of the TPPC would end on 14 September 2014 (Sunday), thus postponed to 15 September 2014.

The request for arbitral pronouncement was filed with CAAD on 12 September 2014, whereby it is concluded that, with respect to Official Notice No. … of 9.5.2014, it is timely.

With respect to Official Notice No. …, of 14.5.2014, it was received by the Claimant (V. m) above) on 16 May 2014. The deadline for voluntary payment would end on 15 June 2014, Sunday, and was thus postponed to the following business day, namely 16 June. Thus, in the terms and with the grounds indicated above, the request is also timely with respect to this Notice.

B. Appraisal

It appears from the factual matters deemed proven that the Claimant did not assess IMT on the identified real property acquisitions, and it further appears that the AT considered that such IMT was due (with 50% exemption being applicable). That is to say that the AT considered that there was a delay in the assessment of the tax, a delay attributable to the Claimant, since it was of the Claimant's making.

In accordance with the provision of Article 35, No. 1 of the General Tax Law, default interest is due when, by a fact attributable to the taxpayer, the assessment of the tax due is delayed.

However, for such interest to be payable, it is not sufficient that the delay in tax assessment be attributable to the taxpayer. It will always depend, in each case, on the possibility of formulating a judgment of censure of the taxpayer's conduct, as has been clearly and unanimously supported by doctrine and jurisprudence.

See, for example, the Judgment of the Supreme Administrative Court of 11.03.2009, according to which "the understandable doubt, difficulty, or reasonable divergence of opinion as to the qualification and classification of a particular tax situation does not contribute to the integration of the said concept of culpability – whereby, by such means, there is no reason for the imposition of default interest", or the Judgment of the Supreme Administrative Court of 23.4.2013, according to which "However, as culpability consists in the culpable omission of a duty of care, which must be appraised according to the general duties of care of a bonus pater familiae, one cannot formulate a judgment of censure against the taxpayer who, based on a plausible interpretation of the applicable legal rules and accepted by the notary who drew up the deed of purchase and sale of a housing unit under the terms mentioned in I, considered that no IMT was due on the acquisition and there was a reduction in the IS to 1/5, reason for which it did not proceed with the respective assessment and prior payment to the deed. Consequently, the taxpayer's culpability in the delay of assessments must be considered as excluded and, thus, its liability for the payment of default interest dismissed."

It is important to understand, therefore, whether there was culpability on the part of the Claimant in the delay in assessment of the tax in question, that is, whether there was a culpable omission of a duty of care, to be assessed in the abstract, by the standard of the bonus pater familiae, placed in the concrete situation.

Until the publication of Law No. 53-A/2006, of 29 December, Article 46 of the STB (current Article 49) provided:

"Real properties integrated in real estate investment funds and similar, in pension funds and retirement savings funds that are established and operate in accordance with national legislation are exempt from municipal tax."

With the publication of that Law (which approved the State Budget for 2007), Number 2 was added to Article 46, with the following wording:

"Real properties integrated in mixed or closed real estate investment funds with restricted subscription by non-qualified investors or by financial institutions on their behalf do not benefit from the exemptions referred to in the preceding number, being the rates of IMI and IMT reduced to half."

That Law No. 53-A/2006 also defined a transitional regime regarding this matter, through paragraph j) of its Article 88, according to which:

"The provision in No. 2 of Article 46 of the Statute of Tax Benefits is applicable, from the date of entry into force of this law, to real properties integrated in mixed or closed real estate investment funds with restricted subscription by non-qualified investors or by financial institutions on their behalf established after 1 November 2006 or carrying out capital increases after that date and, as well, to real properties integrated in funds with identical characteristics whose participation units were, on the date of 1 November 2006, held exclusively by non-qualified investors or by financial institutions on their behalf". (underlining ours)

The Claimant was only established in 2007, thus after the entry into force of the new wording of Article 46 of the STB (the transitional provision being, consequently, not applicable). Nevertheless, the Claimant understood that the provision of No. 1 of that norm was applicable to it and not the provision of the new No. 2. And it did so, it states, due to erroneous interpretation of the norm, whose wording was not clear.

In fact, the Arbitral Tribunal also understands that such wording did, indeed, give rise to doubts in its interpretation.

One need only cite, moreover, Dr. Manuel Faustino ("State Budget 2007 – Amendment to IRS and Tax Benefits" Revista Fiscalidade No. 28, October-December 2006): "the wording of the norm raises the legitimate doubt as to which regime is applicable to real properties integrated in a closed fund with restricted subscription in which qualified investors and non-qualified investors coexist" (underlining ours).

Let us see:

i. Until the end of 2006, closed REIFs with restricted subscription were exempt from IMT, regardless of their investors;

ii. With the State Budget Law for 2007, the legislator introduced a limitation: real properties of mixed or closed real estate investment funds with restricted subscription by non-qualified investors would benefit only from a 50% exemption from that tax;

iii. The question that arose is pertinent: if there is a qualified investor, will this limitation equally apply?

iv. Additionally, in the transitional norm it established an element that also strongly contributed to the legitimate doubt: the new No. 2 would already apply to mixed or closed real estate investment funds with restricted subscription by non-qualified investors whose participation units were, on the date of 1 November 2006, held exclusively by non-qualified investors. The expression "exclusively" raised further doubt – what would be its practical effect if not that of distinguishing what needed to be distinguished?

v. If there was need for distinction and specification in the transitional law provision, in the sense of referring that to funds subscribed exclusively by non-qualified investors the new No. 2 would apply, then the apparently logical conclusion would be to interpret this same No. 2 in the sense that, with at least one qualified investor present, then No. 1 of Article 46 would apply and, consequently, one could benefit from 100% IMT exemption.

Contrary to what the Respondent argues, the wording of Article 46, No. 2 was not explicit.

And so little was it explicit that the AT itself, faced with requests for binding information from taxpayers, was obliged to request an opinion from the Tax Studies Centre. And the Tax Studies Centre itself acknowledged: "the wording of this norm raises doubt as to which regime applies to real properties integrated in mixed or closed real estate investment funds with restricted subscription in which qualified and non-qualified investors coexist".

Furthermore, the interpretation of the norm made by the Tax Studies Centre and the AT was concluded and published only in 2010, that is, 3 (three) years after the date of the facts in the case at hand.

It is thus concluded that the interpretation to be given to the law was doubtful, that it was not clear and that it lent itself to such doubts, as indicated.

It is also concluded, and consequently, that the interpretation made by the Claimant of the law in force was perfectly plausible.

In these terms, and following the superior jurisprudence cited above, one cannot, without more, impute culpability to the Claimant, and there is, thus, no ground for the payment of default interest.

Finally, it is important to verify whether the Claimant was required to adopt different conduct, in particular to exercise its right to request information about its specific situation from the AT, as the Respondent alleges.

Without further ado, it is concluded: this is a right of the taxpayer. It is not, consequently, a duty, a requirement or a mandatory condition for one to consider that a taxpayer acts diligently. It is not possible to subvert the logic of the legal order, configuring a right as a duty, which would be manifestly unconstitutional, by violation, at minimum, of the principle of proportionality and justice.

Additionally, it is further stated that the Respondent's argument does not hold when it indicates that the AT's responses are not applicable to third parties not requesting binding information. Under the principle of cooperation, provided in Article 59 of the General Tax Law, the AT's cooperation with taxpayers includes the publication of generic guidance on the interpretation and application of tax norms. Now, the doctrinal notes attached by the Claimant as documents 6 and 7 of its initial request resulted precisely from requests for binding information from third parties.

The AT must presume the good faith of taxpayers, in legal terms, and not simply impute culpability to them, without any concrete appraisal of the situation in question, in order to require the payment of default interest.

In conclusion, the Claimant acted based on a possible interpretation of the then Article 46 of the STB which, as indicated, raised doubts in interpretation. Thus, it is not possible to formulate any judgment of censure of its conduct. Based on a plausible interpretation of the applicable legal rules – which moreover was accepted by the notary who drew up the deeds of purchase and sale – the Claimant did not assess IMT. Consequently, the Claimant's culpability in the delay of assessments must be considered as excluded and, thus, its liability for the payment of default interest dismissed.

VII. DECISION

In these terms, and based on the grounds exposed, the Arbitral Tribunal decides to uphold the request for arbitral pronouncement presented by the Claimant, annulling the assessments contested with respect to default interest.

Value of the case: €25,860.13 (twenty-five thousand, eight hundred and sixty euros and thirteen cents)

Costs: Under the provision of Article 22, No. 4 of the RJAT, and in accordance with Table I annexed to the Regulation of Costs in Tax Arbitration Cases, the value of costs is fixed at €1,530.00 (one thousand, five hundred and thirty euros), borne by the Respondent.

Lisbon, 27 April 2015

The Arbitrator

Ana Pedrosa Augusto

Frequently Asked Questions

Automatically Created

What is the IMT tax treatment for closed-subscription real estate investment funds (FII) in Portugal?
Under Portuguese law, closed-subscription real estate investment funds (FII fechados de subscrição particular) are subject to specific IMT treatment under Article 46 of the Statute of Tax Benefits. Prior to Law 53-A/2006 (State Budget 2007), these funds enjoyed total IMT exemption on property acquisitions. However, the 2007 reform introduced a distinction: closed or mixed REIFs with restricted subscription by non-qualified investors established after November 1, 2006, or undergoing capital increases after that date, became eligible only for 50% IMT rate reduction rather than full exemption. Funds established before November 1, 2006 could maintain total exemption under transitional provisions, subject to specific conditions. This legislative change significantly impacted the tax treatment of real estate funds structured with both qualified and non-qualified investors, requiring careful analysis of establishment dates and investor composition to determine applicable exemption levels.
Can compensatory interest on IMT liquidation acts be challenged through tax arbitration at CAAD?
Yes, compensatory interest (juros compensatórios) on IMT liquidation acts can be challenged through tax arbitration at CAAD (Administrative Arbitration Centre). Article 2(1)(a) of the Legal Framework for Tax Arbitration (RJAT - Decree-Law 10/2011) grants arbitral tribunals jurisdiction over challenges to tax assessment acts, including ancillary charges such as compensatory interest. In Process 675/2014-T, the tribunal confirmed its material competence to review the legality of €25,860.13 in compensatory interest charged on IMT assessments. Taxpayers can contest compensatory interest separately from the principal tax if they believe the legal requirements for charging such interest are not met, specifically challenging whether delay in assessment was attributable to culpable taxpayer conduct as required under Article 35(1) of the General Tax Law and Article 33(1) of the IMT Code.
What are the timeliness requirements for filing a tax arbitration request against IMT assessments?
The timeliness requirements for filing tax arbitration requests against IMT assessments are governed by Article 10(1) of the RJAT. Taxpayers must submit their arbitration request within the same deadline applicable to judicial appeals under the tax procedure code. For IMT assessments, this typically means within 90 days from notification of the contested act, or within 120 days if the taxpayer is located outside Portuguese territory. In Process 675/2014-T, the fund filed its request on September 12, 2014, challenging IMT assessment notices issued on May 9 and May 14, 2014, which concerned compensatory interest on 2007 transactions. The tribunal examined and confirmed timeliness as part of its preliminary competence analysis, finding no procedural defects that would invalidate the proceeding under Article 3(1) of the RJAT.
How does CAAD assess the legality of compensatory interest charged on IMT for real estate fund transactions?
CAAD assesses the legality of compensatory interest charged on IMT by examining whether the statutory requirements under Article 35(1) of the General Tax Law and Article 33(1) of the IMT Code are satisfied. Compensatory interest requires two cumulative elements: (1) delay in tax assessment attributable to the taxpayer, and (2) culpable conduct by the taxpayer causing that delay. The tribunal analyzes whether the taxpayer's conduct demonstrates culpability or whether the taxpayer acted in good faith with reasonable interpretation of applicable law. Even when a taxpayer's tax position proves ultimately incorrect, compensatory interest may be deemed illegal if the error was excusable and the taxpayer's interpretation was reasonable given legal complexity or ambiguity. In Process 675/2014-T, the tribunal considered whether reliance on the pre-reform total exemption regime, despite complex transitional provisions in Law 53-A/2006, constituted culpable delay or reasonable good-faith interpretation.
What was the outcome of CAAD Process 675/2014-T regarding IMT compensatory interest annulment?
While the complete decision text for CAAD Process 675/2014-T is not provided in the excerpt, the case record shows the fund challenged €25,860.13 in compensatory interest on IMT assessments for 2007 property acquisitions. The fund's core argument was absence of culpability, claiming good-faith reliance on the total IMT exemption regime despite subsequent Tax Authority determination that only 50% exemption applied under Law 53-A/2006 amendments. The fund had already paid the principal IMT assessment of €178,350 but contested the compensatory interest component. The tribunal was regularly constituted on December 10, 2014, with both parties waiving the oral hearing and proceeding by written submissions. The arbitral proceedings focused on whether the complex transitional provisions and ambiguity in the 2007 legislative reforms precluded finding culpable taxpayer delay necessary to sustain compensatory interest charges under Articles 35(1) GTL and 33(1) IMT Code.