Process: 676/2015-T

Date: September 21, 2016

Tax Type: Selo

Source: Original CAAD Decision

Summary

This case involves a challenge by a closed-end real estate investment fund (Fund B) against Stamp Tax assessments totaling €14,179.99 levied on the acquisition of 62 autonomous units for €9,200,000 plus VAT. The central issue concerns the application of Verba 1.1 of the General Stamp Tax Table (TGIS) to real estate transactions where the parties have waived the VAT exemption. In October 2014, the seller (C, S.A.) requested waiver of VAT exemption pursuant to Article 12 of the VAT Code and Decree-Law 21/2007, which was accepted by the fund. The Tax Authority issued 62 certificates confirming the VAT exemption waiver on October 31, 2014. Despite this, when the fund filed the IMT declaration on November 26, 2014, the Tax Authority levied Stamp Tax at 0.8% under Verba 1.1 of TGIS. The fund paid under protest and completed the purchase on December 4, 2014, with the transaction subject to 23% VAT. The fund filed administrative appeals (reclamação graciosa) in March 2015, which were dismissed between August 18-20, 2015. The fund then initiated tax arbitration proceedings at CAAD under Article 95 of the General Tax Law and the Legal Framework for Tax Arbitration (RJAT). The fundamental legal question is whether Stamp Tax should apply to real estate acquisitions when VAT has been charged following a valid waiver of exemption, given that Article 5(2) of the Stamp Tax Code generally excludes from Stamp Tax scope transactions already subject to VAT, preventing double taxation on the same economic transaction.

Full Decision

ARBITRAL AWARD

1. Report

The Closed Tourists Real Estate Investment Fund…, S.A., with registered office at Street…, no.…, … Dist.º, …-… …, registered at the competent Commercial Registry Office under the single registration and collective person number…, with share capital of € 375,000.00 (hereinafter "A…"), managing entity of the Closed Real Estate Investment Fund B…, …, registered with the CMVM under code … (hereinafter "B…."), came, pursuant to article 95 of the General Tax Law, article 99, subsection a) of the Tax Code of Procedure and Tax Process (CPPT), article 43 of the Municipal Tax Code on Onerous Real Estate Transfers applicable ex vi article 49, no. 2, of the Stamp Tax Code and articles 2, 3 and 10 of the Legal Framework for Tax Arbitration, approved by Decree-Law no. 10/2011, of 20 January and amended by Law no. 66-B/2012, of 31 December (Legal Framework for Tax Arbitration, hereinafter referred to only as "RJAT"), to request the Establishment of an Arbitral Tribunal and to present the following request for Arbitral Pronouncement, with a view to the declaration of illegality and consequent annulment of the dismissal decisions rendered by the Chief of Finance of the Finance Service … – …, in the following administrative appeal proceedings:

[…2015…, …2015…, …2015…, …2015…, …2015…, …2015…, …2015…, …2015…, …2015…, …2015…, …2015…, …2015…, …2015…, …2015…, …2015…, …2015…]

The Claimant concludes its request by requesting the annulment of the Stamp Tax levy no.…, dated 26 November 2014, in the amount of € 14,179.99 (fourteen thousand one hundred and seventy-nine euros and ninety-nine cents), relating to the acquisition by B… of sixty-two autonomous units, designated by the letters "B", "C", "D", "E", "F", "G", "H", "I", "J", "L", "M", "N", "O", "P", "Q", "R", "S", "T", "U", "V", "X", "Z", "AA", "AB", "AC", "AD", "AE", "AF", "AG", "AH", "AI", "AJ", "AL", "AM", "AN", "AO", "AP", "AQ", "AR", "AS", "AT", "AU", "AV", "AX", "AZ", "BA", "BB", "BC", "BD", "BE", "BF", "BG", "BH", "BI", "BJ", "BL", "BM", "BN", "BO", "BP", "BQ" and "BR", all of the urban property, established under the horizontal property regime, located at Avenue …, numbers…, … and … and …, numbers … and …, in …, Union of Civil Parishes of … and …, described in the … Land Registry Office of … under number … of the extinct civil parish of … and registered in the urban property matrix of the Union of Civil Parishes of … and … under provisional article … (hereinafter collectively referred to as "Autonomous Units") and furthermore, the condemnation of the Tax Authority to refund the amounts improperly paid, increased by the corresponding compensatory interest, pursuant to article 43 of the General Tax Law.

The AUTHORITY FOR TAX AND CUSTOMS ("Tax Authority") is the Respondent.

The request for establishment of the arbitral tribunal was accepted by the President of CAAD and automatically notified to the Tax Authority on 13 November 2015.

Pursuant to no. 1 of article 6 and subsection b) of no. 1 of article 11 of the RJAT, in the wording introduced by article 228 of Law no. 66-B/2012, of 31 December, the Deontological Council appointed as sole arbitrator the undersigned, Mariana Gouveia de Oliveira, who communicated acceptance of the appointment within the applicable deadline.

On 7 January 2016, the parties were duly notified of this appointment and did not manifest any intention to refuse the designation of the sole arbitrator, in accordance with the combined provisions of article 11, no. 1, subsections a) and b) of the RJAT and articles 6 and 7 of the Deontological Code.

Thus, in accordance with the provision in subsection c) of no. 1 of article 11 of the RJAT, in the wording introduced by article 228 of Law no. 66-B/2012, of 31 December, the sole arbitral tribunal was established on 22 January 2016.

The Tax Authority responded, arguing that the request for arbitral pronouncement should be rejected, requesting from the outset a waiver of the meeting provided for in article 18 of the RJAT and also of the submission of pleadings.

On 18 March 2016, the Claimant was notified to pronounce itself on the waiver of the arbitral meeting provided for in article 18 of the RJAT and submission of pleadings, which manifested no objection on 1 April 2016.

Thus, on 16 June 2016, the deadline for issuance of the award was set for 22 July 2016, a deadline which was subsequently extended to 22 September 2016.

The parties have legal standing and capacity, are entitled to sue and are represented (articles 4 and 10, no. 2, of the same statute and article 1 of Ordinance no. 112-A/2011, of 22 March).

The case is not affected by any nullities and no exceptions were raised.

Thus, there is no obstacle to consideration of the merits of the case.

2. Factual Matter

2.1 Proven Facts

Based on the elements contained in the case file and the administrative file attached to the proceedings, the following facts are considered proven:

A) In October 2014, C…, S.A., the previous owner of the Autonomous Units, requested, pursuant to nos. 5 and 6 of article 12 of the VAT Code and of the Regime for Waiver of VAT Exemption on Operations Relating to Real Estate, approved by Decree-Law no. 21/2007, of 29 January, the waiver of the exemption from VAT on the sale of the Autonomous Units in favour of the Fund, which request was accepted by B….

B) On 31 October 2014, the Tax Authority issued 62 certificates of waiver of VAT exemption on the transfer of real estate, relating to each of the Autonomous Units to be transferred in favour of B… (see documents attached with the request for arbitral pronouncement as documents nos. 1 to 62).

C) On 26 November 2014, following the presentation by B… of the declaration for levy of the Tax on Onerous Real Estate Transfers (IMT) relating to the acquisition of the Autonomous Units, the Finance Service … … proceeded to issue the Stamp Tax payment document no.…, in the amount of € 14,179.99 (fourteen thousand one hundred and seventy-nine euros and ninety-nine cents) (Doc. no. 63 attached with the request for arbitral pronouncement, the contents of which are reproduced here).

D) On that same day, that is, on 26 November 2014, B… proceeded to pay the amount of € 14,179.99 (fourteen thousand one hundred and seventy-nine euros and ninety-nine cents) as Stamp Tax relating to the acquisition of the Autonomous Units (Doc. no. 64 attached with the request for arbitral pronouncement, the contents of which are reproduced here).

E) B… acquired the Autonomous Units, with waiver of VAT exemption, by public deed of purchase and sale executed on 4 December 2014 (Doc. no. 65 attached with the request for arbitral pronouncement, the contents of which are reproduced here).

F) The Autonomous Units were acquired at the global price of € 9,200,000.00 plus Value Added Tax (VAT), at the legal rate of 23%.

G) On 12 March 2015, A…, on behalf of B…, filed an administrative appeal against the Stamp Tax levy no. … before the Finance Service … … (Doc. no. 66 attached with the request for arbitral pronouncement, the contents of which are reproduced here).

H) The Finance Service … … instituted an administrative appeal procedure for each individual stamp tax levy relating to each of the Autonomous Units transferred.

I) Between 20 and 29 July 2015, A…, on behalf of B…, was notified of 62 draft decisions to dismiss the administrative appeal filed.

J) On 4 August 2015, B… exercised, 62 times, the right to prior hearing within the scope of the administrative appeal proceedings identified above, arguing for the revocation of the draft dismissal decisions and for the granting of the request(s) for annulment of the Stamp Tax levy/levies relating to the acquisition of the Autonomous Units.

K) On 18, 19 and 20 August 2015, A…, on behalf of B…, was notified of 62 decisions to dismiss the administrative appeal filed (Docs. nos. 67 to 128 attached with the request for arbitral pronouncement, the contents of which are reproduced here), in which, among other things, the following is stated:

"As the basis of the request for annulment of the contested levy, the taxpayer alleges that 'being a situation subject to VAT, although exempt from it, and verifying waiver of the exemption, there is taxation under VAT, which in light of the provision of no. 2 of article 1 of the Stamp Tax Code, will imply that there cannot also be subjection to Stamp Tax, under penalty of there being double taxation on the same reality' (petition, articles 11 and 13).

In the opinion of the appellant, the norm of article 1, no. 2 of the Stamp Tax Code therefore applies to the case, according to which there are no operations 'subject' to stamp tax 'operations subject to value added tax and not exempt from it'.

However, it must be noted that, whereas value added tax is levied on the operation, the stamp tax on item 1.1 is levied on the contract, as has been argued in the tax administration regarding the distinction between these two taxes at the level of the incidence, a distinction relevant to the question to be decided.

Now, having this distinction in mind, the levy of the stamp tax contested should be considered legal, and the payment for reimbursement of which is requested."

L) On 13 November 2015, the request for establishment of the arbitral tribunal, which gave rise to the present proceedings, was accepted by the President of CAAD.

2.2 Unproven Facts

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

2.3 Justification for the Determination of Factual Matter

The proven facts are based on the documents attached with the request for arbitral pronouncement and on the administrative file.

3. Legal Matter

Preliminarily, it should be noted that the Tribunal is not bound by the order in which the alleged defects, or their grounds, are presented by the parties (see art. 124 of the CPPT, ex vi art. 29 of the RJAT), and may analyse preliminarily those that best protect the interests at stake.

The question arises whether stamp tax (item 1.1 of the General Table of the Stamp Tax) is due on the transfer of real property in respect of which there has been a waiver of VAT exemption.

In summary, the Claimant alleges that:

"15. The acquisition of the Autonomous Units corresponds to an onerous transfer of property effected in national territory by a taxable person acting as such and, by virtue of the aforementioned waiver of VAT exemption, is subject to VAT in accordance with article 1, no. 1 of the VAT Code.

  1. Now, in light of the norm contained in no. 2 of article 1 of the Stamp Tax Code, this implies that this same transfer cannot also be subject to Stamp Tax, under penalty of there being double taxation on the same reality.

  2. In fact, the aforementioned no. 2 of article 1 of the Stamp Tax Code provides that 'Operations subject to value added tax and not exempt from it shall not be subject to tax.'

  3. Thus, item 1.1 of the General Table of the Stamp Tax cannot be applied to the transfer of a real property subject to VAT by waiver of the respective exemption, pursuant to article 12 of the VAT Code.

  4. It should further be added that the Stamp Tax provided for in item 1.1 of the General Table does not relate to contracts but rather to operations.

  5. The Stamp Tax Code establishes in no. 2 of article 1 that 'Operations subject to value added tax and not exempt from it shall not be subject to tax.'"

For its part, the Respondent counters that "whereas value added tax is levied on the operation, the stamp tax on item 1.1 is levied on the contract, as has been argued in the tax administration regarding the distinction between these two taxes at the level of incidence, a distinction relevant to the question to be decided.

Now, having this distinction in mind, the levy of the stamp tax contested should be considered legal, and the payment for reimbursement of which is requested."

Let us examine this.

As regards objective scope, nos. 1 and 2 of article 1 of the Stamp Tax Code provide that:

"1 - Stamp tax is levied on all deeds, contracts, documents, securities, papers and other legal facts or situations provided for in the General Table, including gratuitous transfers of property.

2 - Operations subject to value added tax and not exempt from it shall not be subject to tax."

Item 1.1 of the General Table of the Stamp Tax ("GTST") provides for the incidence of stamp tax on

"Onerous acquisition or by gift of the right of ownership or of fractional figures of that right over real property, as well as the resolution, invalidity or extinction, by mutual agreement, of the respective contracts - on the value: 0.8%"

Pursuant to articles 1 and 3 of the VAT Code, transfers of property located in national territory are subject to tax. However, as a rule, transfers of real property are exempt from VAT in accordance with no. 30 of article 9 of the said legal provision. However, pursuant to article 12 of the VAT Code, it is possible, under certain circumstances, to waive the VAT exemption, in which case the general taxation regime is entirely applicable, as was the case in the matter at hand.

The Respondent contends, however, that, whereas VAT is levied on the operation – i.e., the transfer of the property – stamp tax would be levied rather on the contract.

The Respondent is correct when it argues that stamp tax is not necessarily levied on operations, but may also be levied on the documents that evidence said operations. However, this reality today is reduced only to taxation relating to the issuance of cheques, pursuant to item 4 of the GTST, in accordance with which payment of an amount fixed by law is imposed, irrespective of the value of the underlying operation.

Differently, item 1.1 GTST imposes ad valorem taxation, clearly seeking to reach the taxpaying capacity revealed by the legal transaction. Indeed, in the version of the Stamp Tax Code introduced with the Taxation Reform on Patrimonial Assets (Decree-Law no. 287/2003, of 12 November), cumulative incidence of stamp tax on the transfer of the property (item 1.1) and on the deed that evidenced such transfer (item 15.1) was provided for, clearly demonstrating the different nature of each item.

In this sense, account must be taken of what was decided by the Supreme Administrative Court (SAC), in its erudite Decision no. 790/10 of 24 February 2011[1], in which it states: "In any event, returning to the scope of stamp tax, as Professor Saldanha Sanches equally emphasises in another place (Manual of Tax Law, 3rd ed., 2007, p. 436), this tax is regulated by two interdependent codes: the Stamp Tax Code and the General Table of the Stamp Tax, which contains the respective rates and concretises, in alphabetical order, the tax facts. In this sense, article 1 of the Stamp Tax Code determines that it is levied 'on all deeds, contracts, documents, securities, books, papers and other facts provided for in the General Table, including gratuitous transfers of property'.

Now, inasmuch as the tax is levied on all the realities contained in the General Table and considering that it specifies distinct realities, account must be taken of the fact that, given the nature of each of them, the tax may be due on documents that evidence transactions (tax on the document - the law fixing, in this case and as a rule, the respective taxable value) or may be due on the celebration of the transaction itself, as a legal act (tax on the operation - the tax varying, in this case, according to the value of the transaction), irrespective of whether or not a written document exists.

And it is this distinction that is relevant for the purposes of the provision contained in the aforementioned no. 2 of article 1 of the Stamp Tax Code, without forgetting, moreover, that, on the one hand, although this no. 2 excludes from stamp tax taxation operations that, although provided for in the table, are subject to VAT, such exclusion does not cover the tax on the document that possibly evidences them and that, on the other hand, this provision removes from stamp tax taxation not the operators but rather the operations in concrete."

Now, in the situation under analysis, the overlap of the incidence of VAT and stamp tax is even clearer, inasmuch as both taxes are levied on a reality of instantaneous execution – the transfer/acquisition of the property, thus not raising the question of whether the celebration of the contract should have fiscal autonomy in relation to continuing services, as occurs in the case of leasing.

In these terms, the request of the Claimant should be deemed well-founded and the contested stamp tax levy should be annulled.

4. Compensatory Interest

The Claimant further requests that the Tax Authority be condemned to refund the amounts improperly paid, increased by the corresponding compensatory interest, pursuant to article 43 of the General Tax Law.

This same question has been raised in various previous proceedings in which a matter entirely identical to that of the case is analysed, among which is proceedings 303/2015-T of CAAD, in which it was written what follows, which is now, with due deference, transcribed:

"In accordance with the provision in subsection b) of art. 24 of the RJAT, the arbitral award on the merits of the claim, in respect of which no appeal or challenge is possible, binds the tax administration as from the expiry of the deadline provided for appeal or challenge, and the latter must, in the exact terms of the success of the arbitral award in favour of the taxpayer and until the expiry of the deadline provided for spontaneous execution of sentences of tax courts, 'restore the situation that would exist if the tax act object of the arbitral award had not been executed, adopting the necessary acts and operations for that purpose', which is in line with the provision in art. 100 of the General Tax Law [applicable by virtue of the provision in subsection a) of no. 1 of art. 29 of the RJAT] which establishes that 'the tax administration is obliged, in case of total or partial success of an administrative appeal, judicial challenge or appeal in favour of the taxpayer, to immediately and fully restore the legality of the act or situation object of the dispute, including the payment of compensatory interest, if applicable, as from the expiry of the deadline for execution of the decision'.

Although art. 2, no. 1, subsections a) and b), of the RJAT uses the expression 'declaration of illegality' to define the jurisdiction of the arbitral tribunals operating in CAAD, making no reference to condemning decisions, it should be understood that the powers attributed to tax courts in judicial challenge proceedings are comprised within its jurisdiction, and this is the interpretation that aligns with the sense of the legislative authorisation on which the Government based itself to approve the RJAT, in which it is proclaimed, as a first guideline, that 'the tax arbitration process should constitute an alternative procedural means to judicial challenge proceedings and to an action for recognition of a right or legitimate interest in tax matters'.

The judicial challenge process, although essentially a process for annulment of tax acts, admits the condemnation of the Tax Administration to payment of compensatory interest, as is apparent from art. 43, no. 1, of the General Tax Law, in which it is established that 'compensatory interest is due when it is determined, in an administrative appeal or judicial challenge, that there was error attributable to the services from which resulted payment of the tax debt in an amount higher than that legally due' and from art. 61, no. 4 of the CPPT (as amended by Law no. 55-A/2010, of 31 December, to which corresponds no. 2 in the original wording), which provides that 'if the decision recognising the right to compensatory interest is judicial, the deadline for payment shall run from the start of the deadline for its spontaneous execution'.

Thus, no. 5 of art. 24 of the RJAT, when it states that 'payment of interest, irrespective of its nature, is due in accordance with the terms provided for in the general tax law and in the Tax Code of Procedure and Tax Process', should be understood as allowing recognition of the right to compensatory interest in arbitration proceedings, as well as the refund of the amount paid, which is a prerequisite for the existence of such interest."

In light of the foregoing, the request for refund of the amount improperly paid in the amount of € 14,179.99 (fourteen thousand one hundred and seventy-nine euros and ninety-nine cents), increased by compensatory interest, must be considered.

Following the illegality of the levy act object of the present proceedings, there is no doubt that the Tax Authority shall proceed to restitution of the amounts improperly paid, giving effect to the imperative of article 100 of the General Tax Law cited above.

As regards the right to compensatory interest, there is no doubt that there was error attributable to the services, from which resulted payment of the tax debt in an amount higher than that legally due.

The concept of "error attributable to the services" has been extensively analysed by the SAC, which uniformly has maintained that "(…) as stated in the erudite Decision of the SAC of 05.05.99 – Appeal no. 5557-A, 'the use of the expression 'error' and not 'defect' or 'illegality' to refer to facts that can serve as a basis for the attribution of interest, reveals that only the defects of the annulled act to which this designation is appropriate were kept in mind, which are error regarding the presumptions of fact and error regarding the presumptions of law (see Appendix to the Official Journal of 19.6.2002, at p. 1724).

This means that the error to which the cited provisions allude is not any defect or illegality but that which is concretised in erroneous assessment of relevant factuality or in erroneous application of the legal norm. Left out, as has been repeated jurisprudence of this Supreme Court, are cases of annulment of tax acts based on formal defects or procedural defects"[2].

In the case at hand, the illegality of the contested tax levies derives precisely from error regarding the presumptions of law, committed by the Tax Authority and consequently attributable to it.

Thus, the Respondent shall give effect to the present arbitral award, in accordance with article 24, no. 1, of the RJAT, determining the amount to be refunded to the Claimant and calculating the respective compensatory interest, at the statutory supplementary rate for civil debts, pursuant to articles 35, no. 10, and 43, nos. 1 and 5, of the General Tax Law, 61 of the CPPT, 559 of the Civil Code and Ordinance no. 291/2003, of 8 April (or statute or statutes that may succeed it).

Compensatory interest is due from the dates of the payments made until the date of processing of the credit note, in which they are included (article 61, no. 5, of the CPPT).

5. Decision

In these terms, this Arbitral Tribunal decides:

a) To find the request for arbitral pronouncement well-founded, and consequently, the sixty-two dismissal decisions rendered by the Chief of Finance of the Finance Service … …, above better identified, to be illegal, on the grounds of the illegality of the subjection to Stamp Tax of the acquisition of the sixty-two autonomous units designated by the letters "B", "C", "D", "E", "F", "G", "H", "I", "J", "L", "M", "N", "O", "P", "Q", "R", "S", "T", "U", "V", "X", "Z", "AA", "AB", "AC", "AD", "AE", "AF", "AG", "AH", "AI", "AJ", "AL", "AM", "AN", "AO", "AP", "AQ", "AR", "AS", "AT", "AU", "AV", "AX", "AZ", "BA", "BB", "BC", "BD", "BE", "BF", "BG", "BH", "BI", "BJ", "BL", "BM", "BN", "BO", "BP", "BQ" and "BR", all of the urban property, established under the horizontal property regime, located at Avenue …, numbers…, … and … and …, numbers … and …, in …, Union of Civil Parishes of … and …, described in the … Land Registry Office of Cascais under number … of the extinct civil parish of … and registered in the urban property matrix of the Union of Civil Parishes of … and … under provisional article …, pursuant to no. 2 of article 1 of the Stamp Tax Code and article 99 of the CPPT;

b) To annul the Stamp Tax levy document no.…, dated 26 November 2014, in the amount of € 14,179.99 (fourteen thousand one hundred and seventy-nine euros and ninety-nine cents);

c) To find well-founded the requests for refund of the amounts paid, in the total amount of € 14,179.99 (fourteen thousand one hundred and seventy-nine euros and ninety-nine cents) and for payment of compensatory interest on this amount, calculated at the statutory supplementary rate, from the date of payment until full refund of such amounts, and to condemn the Authority for Tax and Customs to make such payments.

6. Value of Proceedings

In accordance with the provision in article 306, no. 2, of the Code of Civil Procedure and 97-A, no. 1, subsection a), of the CPPT and 3, no. 2, of the Regulation of Costs in Tax Arbitration Proceedings, the value of the proceedings is fixed at € 14,179.99 (fourteen thousand one hundred and seventy-nine euros and ninety-nine cents).

7. Costs

Pursuant to article 22, no. 4, of the RJAT, the amount of costs is fixed at € 918, in accordance with Table I attached to the Regulation of Costs in Tax Arbitration Proceedings, to be borne by the Respondent Tax Authority.

Lisbon, 21 September 2016

The Arbitrator

(Mariana Gouveia de Oliveira)

[1] Supreme Administrative Court Decision no. 790/10 of 24 February 2011, available at http://www.dgsi.pt/ .

[2] Supreme Administrative Court Decision no. 01610/13 of 12 February 2015, available at http://www.dgsi.pt/ .

Frequently Asked Questions

Automatically Created

What is Verba 1.1 of the Tabela Geral do Imposto do Selo (TGIS) and how does it apply to real estate transactions in Portugal?
Verba 1.1 of the Tabela Geral do Imposto do Selo (TGIS - General Stamp Tax Table) imposes Stamp Tax at a rate of 0.8% on onerous acquisitions of real estate property rights located in Portuguese territory. This provision applies to property purchases, including by real estate investment funds. However, pursuant to Article 5(2) of the Stamp Tax Code, transactions subject to VAT are excluded from Stamp Tax scope to prevent double taxation. Therefore, when a real estate sale involves a valid waiver of VAT exemption under Article 12 of the VAT Code and Decree-Law 21/2007, making the transaction subject to VAT at 23%, Verba 1.1 of TGIS should not apply, as the transaction falls outside the material scope of Stamp Tax.
How does the waiver of VAT exemption (renúncia à isenção de IVA) affect Stamp Tax liability on property sales?
The waiver of VAT exemption (renúncia à isenção de IVA) has significant implications for Stamp Tax liability on property sales in Portugal. Under normal circumstances, real estate sales are exempt from VAT but subject to Stamp Tax under Verba 1.1 of TGIS at 0.8%. However, when parties validly waive the VAT exemption pursuant to Article 12 of the VAT Code and Decree-Law 21/2007, the transaction becomes subject to VAT (typically at 23%). According to Article 5(2) of the Stamp Tax Code, operations subject to VAT are excluded from the material scope of Stamp Tax to avoid cumulative taxation. Therefore, when VAT exemption is waived and VAT is charged, Stamp Tax under Verba 1.1 should not be levied, as the legal basis for Stamp Tax ceases to exist.
Can a real estate investment fund challenge Stamp Tax assessments through tax arbitration (CAAD) in Portugal?
Yes, real estate investment funds can challenge Stamp Tax assessments through tax arbitration at CAAD (Centro de Arbitragem Administrativa) in Portugal. Under Article 95 of the General Tax Law, Article 99(a) of the Tax Procedure and Process Code (CPPT), and the Legal Framework for Tax Arbitration (RJAT) approved by Decree-Law 10/2011, taxpayers—including investment funds acting through their managing entities—have legal standing to request arbitral proceedings. As demonstrated in this case, the closed-end real estate investment fund, represented by its managing entity, successfully initiated arbitration proceedings after exhausting the administrative appeal process. The fund had legitimate interest and legal capacity to contest the Stamp Tax levy through CAAD's arbitral tribunal system.
What is the procedure for filing a gracious complaint (reclamação graciosa) against Stamp Tax decisions in Portugal?
The procedure for filing a gracious complaint (reclamação graciosa) against Stamp Tax decisions in Portugal follows the rules established in Articles 68-78 of the Tax Procedure and Process Code (CPPT). The taxpayer must file the administrative appeal within the legal deadline (typically within 120 days from notification of the tax assessment or payment) before the competent tax authority that issued the decision—in this case, the Finance Service (Serviço de Finanças). The tax authority will issue a draft decision and notify the taxpayer, who has the right to a prior hearing (audição prévia) before the final decision. If the administrative appeal is dismissed, the taxpayer can then seek judicial review or, alternatively, request tax arbitration at CAAD within 90 days of notification of the dismissal decision, as occurred in this case.
How did the CAAD rule on the application of Stamp Tax to real estate purchases by closed-end investment funds?
While the complete arbitral award text is not fully provided, the case establishes that CAAD has jurisdiction to review Stamp Tax assessments on real estate purchases by closed-end investment funds. The central legal question concerns whether Stamp Tax under Verba 1.1 of TGIS applies when the transaction is subject to VAT following a valid waiver of exemption. The typical ruling in such cases follows the principle established in Article 5(2) of the Stamp Tax Code: transactions subject to VAT are excluded from Stamp Tax scope to prevent double taxation. When the Tax Authority issues certificates confirming VAT exemption waiver and the transaction is completed with VAT charged, the legal basis for levying Stamp Tax ceases, and such assessments should be annulled with refund of amounts paid plus compensatory interest under Article 43 of the General Tax Law.