Process: 677/2016-T

Date: June 26, 2017

Tax Type: IMT

Source: Original CAAD Decision

Summary

In CAAD Process 677/2016-T, an open real estate investment fund challenged IMT assessments on two properties acquired in December 2015. The Tax Authority applied a 3.25% IMT rate based on Article 49 of the Tax Benefits Statute (EBF), which provided a 50% reduction for properties integrated into open or closed real estate investment funds of public subscription. The claimant argued for full IMT exemption under Article 1 of Decree-Law 1/87, which originally exempted real estate acquisitions made by fund management companies for real estate investment funds from transfer tax (SISA). The claimant contended this exemption remained valid after SISA was replaced by IMT through Decree-Law 287/2003. The Tax Authority countered that Article 49 EBF had evolved through successive legislative amendments, progressively restricting tax benefits from full exemption to partial reduction, and ultimately eliminating benefits for real estate investment funds. The Authority argued that Decree-Law 1/87's exemption was implicitly repealed by subsequent legislation, particularly Law 53-A/2006 which excluded IMT exemptions for real estate investment funds. The case presents a fundamental question about whether older tax exemptions survive legislative reforms that introduce new, more restrictive benefit regimes. The arbitral tribunal had to determine whether the specific exemption in Decree-Law 1/87 remained in force or was superseded by the evolving framework of Article 49 EBF. This decision has significant implications for real estate investment fund taxation and the interpretation of transitional provisions when tax benefit legislation undergoes substantial reform.

Full Decision

ARBITRAL DECISION

The Arbitrators José Baeta de Queiroz, António Alberto Franco and Diogo Leite de Campos, appointed by the Deontological Board of the Administrative Arbitration Centre to form the present Arbitral Tribunal, agree as follows:

I – REPORT

1. A…, Tax Identification Number … represented by B… - Real Estate Investment Fund Management Company, SA, Tax Identification Number … (hereinafter referred to only as the Claimant), with registered office at …, no. …, Lisbon, filed, on 10-11-2016, a request for constitution of the arbitral tribunal, under the terms of articles 2nd and 10th of Decree-Law No. 10/2011, of 20 January (Legal Regime of Arbitration in Tax Matters, hereinafter referred to only as RJAT), in conjunction with article 102nd of the Code of Tax Procedure and Process (CPPT), in which the Tax and Customs Authority (hereinafter referred to only as the Respondent, or ATA) is required.

2. The claimant seeks, with its request, the declaration of illegality of the tacit rejection of the complaint regarding the acts of assessment of Municipal Tax on Onerous Transfer of Real Estate (IMT), under numbers … and …, with the consequent reimbursement of the tax paid, as well as recognition of the right to indemnity interest.

3. The request for constitution of the arbitral tribunal was accepted by the President of CAAD and automatically notified to the Tax and Customs Authority on 11-11-2016.

3.1. The claimant did not proceed to appoint an arbitrator, wherefore, under the provisions of subparagraph a) of no. 2 of article 6th and subparagraph b) of no. 1 of article 11th of RJAT, the President of the Deontological Board appointed the undersigned as arbitrators of the collective arbitral tribunal, who communicated acceptance of the appointment within the prescribed period.

3.2. On 11-01-2017 the parties were notified of the appointment of the arbitrators, and no objection was raised.

3.3. In accordance with the provision in subparagraph c) of no. 1 of article 11th of RJAT, the collective arbitral tribunal was constituted on 26-01-2017.

3.4. On these grounds, the Arbitral Tribunal is duly constituted to consider and decide the object of the proceedings.

4. To support the request for arbitral decision, the claimant alleges, in summary, the following:

That it is an Open Real Estate Investment Fund, constituted and operating under the terms provided in the Legal Regime of Real Estate Investment Funds.

That it acquired two real estate properties on 15-12-2015, having, prior to the acquisitions, submitted the respective declarations for assessment – Form 1, following which the Tax and Customs Authority issued the assessment notes that are the subject of the present proceedings, in which the tax rate of 3.25% was applied, resulting from the application of the provision in no. 1 of article 49th of the Tax Benefits Statute (EBF), in the version then in force which stipulated that "are reduced to one half the rates of municipal tax on onerous transfers of real estate applicable to real estate integrated into open or closed real estate investment funds of public subscription…".

It maintains, however, that such transfers should have been exempted from IMT based on the provision in article 1st of Decree-Law 1/87, of 3 January, and it is certain that Decree-Law 287/2003, of 12 November, which carried out the reform of asset taxation, provided in its article 31st, no. 3 that all legal texts that mention Code of Municipal Tax on Transfers (Sisa) are considered as referring to the Code of Municipal Tax on Onerous Transfers of Real Estate.

In any case, the claimant argues that the exemptions and tax rate reductions provided for in articles 46th and 49th of the EBF are applicable not to real estate acquired by real estate investment funds, but rather to real estate acquired by these funds.

As article 1st of Decree-Law 1/87 has not ceased or been repealed, it remains in force in the legal order.

It concludes, therefore, the claimant that the assessments that are the subject of the arbitral request are illegal.

5. The Tax and Customs Authority presented a response, invoking, in summary, the following:

From the amendments to article 49th of the EBF, it follows that the exemption from IMI and IMT would be restricted, in 2010, to open real estate investment funds, subsequently extended to closed funds of public subscription, evolving, in 2014, to the reduction of tax rates by half for acquisitions of real estate integrated into open and closed real estate investment funds of public subscription, culminating in the elimination of the exemption for all real estate investment funds.

Hence it follows that, although admitting the ambiguity of the expression of real estate "integrated" contained in the successive versions of articles 46th/49th of the EBF, the scope of subjective incidence of no. 1 of article 49th encompasses only open or closed real estate investment funds of public subscription, pension funds and pension savings funds that are constituted and operate in accordance with national legislation.

On the other hand, it does not appear that article 1st of Decree-Law 1/87, of 3 January remains in force, which provides that acquisitions of real estate assets made for a real estate investment fund by the respective management company are exempted from transfer tax (sisa), article 31st, no. 3 of Decree-Law 287/2003, of 12 November, not having the force to maintain the IMT exemption for acquisitions of real estate made by all real estate investment funds, regardless of whether they are open, closed or mixed funds, depending on the composition of participation units.

Furthermore, even though no. 2 of article 46th of the EBF was subsequently repealed, it results from subparagraph j) of article 88th of Law 53-A/2006, of 29 December, that the IMT exemption does not apply to all real estate investment funds.

To this extent, it does not appear that the exemption provided for in article 1st of Decree-Law 1/87 remains in force. Indeed, if matters were as the claimant argues, the IMT exemption would apply to all real estate acquisitions made by all real estate investment funds, open, closed and mixed, from 1987 to the present date, even though Law 7-A/2006, of 30 March repealed article 49th of the EBF, which it does not accept.

It concludes, therefore, the respondent by the legality of the assessment acts contested by the claimant which should, therefore, be upheld.

6. By order of 02-03-2017, the meeting provided for in article 18th of RJAT was dispensed with.

7. The parties submitted arguments, maintaining the positions set out in their respective pleadings.

II – PRELIMINARY MATTERS

8.1. The tribunal is competent and duly constituted.

8.2. The parties have legal personality and capacity, demonstrate themselves to be legitimate and are duly represented (articles 4th and 10th, no. 2, of RJAT and article 1st of Ordinance No. 112-A/2011, of 22 March).

8.3. The proceedings do not suffer from nullities.

8.4. The joinder of claims is legal.

8.5. No exceptions have been raised that prevent knowledge of the merits of the case.

III – FACTUAL AND LEGAL MATTERS

III.1. Factual Matters

9. Factual Matters

9.1. Taking into account the positions assumed by the parties and the documentary evidence attached to the file, the following facts are considered, which are relevant for the consideration and decision of the issues raised:

a) The Claimant is an Open Real Estate Investment Fund, constituted and operating under the terms provided in the Legal Regime of Real Estate Investment Funds, approved by Decree-Law 60/2002 of 20 March;

b) On 15-12-2015 the Claimant acquired two urban real estate properties located in the parish of …, Lisbon, registered in the urban property register under articles … and …, respectively;

c) On 14-12-2015 the Claimant submitted the "Declarations for Assessment – Form 1", relating to such acquisitions;

d) With the same date of 14-12-2015, the ATA issued the IMT assessment notes with numbers … and …, with IMT being assessed at the rate of 3.25%, resulting from the application of article 49th, no. 1 of the EBF;

e) The taxes assessed were paid by the Claimant on 14-12-2015;

f) The Claimant submitted an administrative complaint of the said assessments on 13-04-2016;

g) On 10-11-2016 the claimant had not yet been notified of any response to that complaint.

9.2. Substantiation of Factual Matters:

The factual matters given as proven rest on critical examination of the documentary evidence presented and not contested, which is hereby reproduced.

9.3. There are no other facts with relevance for consideration of the merits of the case that have not been proven.

III.2. Legal Matters

As results from the arbitral request, the claimant expressed its non-conformity with the assessment acts contested, believing, in sum, that the acquisitions of real estate that it made benefit from the exemption contemplated in article 1st of Decree-Law 1/87, of 3 January, the respondent arguing that the same is not in force.

Let us then consider:

It is established that the claimant is an Open Real Estate Investment Fund.

With a view to creating conditions tending towards the creation of investment funds, the legislator through Decree-Law 1/87, of 3 January, provided in its article 1st that "acquisitions of real estate assets made for a real estate investment fund by the respective management company are exempted from transfer tax (sisa)".

A norm that raises no interpretive doubts, it following literally therefrom that it was intended that the acquisition of real estate intended to be integrated into any type of real estate investment fund would benefit from exemption from transfer tax.

Following the reform of asset taxation carried out by Decree-Law 287/2003, of 12 November and which, in that context, repealed the Code of Municipal Tax on Transfers (Sisa), that decree established in no. 2 of article 28th that:

- "all legal texts that mention Code of Municipal Tax on Transfers and Inheritance and Donations Tax, municipal tax on transfers or inheritance and donations tax are considered as referring to the Code of Municipal Tax on Onerous Transfers of Real Estate (CIMT), to the Code of Stamp Duty, to the municipal tax on onerous transfers of real estate (IMT) and to stamp duty, respectively".

Having further determined in no. 6 of article 31st that:

- "the tax benefits relating to municipal contribution, now referred to IMI (Municipal Real Estate Tax), as well as those relating to municipal tax on transfers established in legislation outside the Code approved by Decree-Law No. 41969, of 24 November 1958, and in the Tax Benefits Statute, which are now referred to IMT, remain in force."

From what has just been stated results unequivocally that acquisitions of real estate intended to be integrated into any type of real estate investment fund, which until then benefited from exemption from transfer tax, now enjoy the same exemption, now in the context of IMT.

However, meanwhile, the State Budget Law of 2007 – Law 53-A/2007, of 29 December, came, in its article 82nd, to amend article 46th of the EBF, which now provided:

"1- Real estate integrated into real estate investment funds, pension funds and pension savings funds that are constituted and operate in accordance with national legislation are exempted from municipal real estate tax (IMI) and municipal tax on onerous transfers of real estate (IMT).

2 - Real estate integrated into mixed or closed real estate investment funds of private subscription, by non-qualified investors or by financial institutions on their behalf, do not benefit from the exemptions referred to in the previous number, with the rates of municipal real estate tax and municipal tax on onerous transfers of real estate being reduced by half".

It is on the basis of this new version of article 46th of the EBF (subsequently renumbered as 49th) and in the subsequent legislative evolution to which the same was subject, that the respondent argues that the exemption provided for in article 1st of Decree-Law 1/87 is not in force.

The issue is, therefore, to determine whether or not the repeal – even if tacit – of that exemption has occurred.

To answer this we must resort to article 7th of the Civil Code which, regarding the cessation of validity of law, provides that "unless intended to have temporary validity, a law only ceases to be in force if it is repealed by another law".

As to the possible temporary validity of Decree-Law 1/87, of 3 January it is indisputable that the same contains no such provision, wherefore, not having been repealed by any other decree, it will remain fully in force today.

It must be said, from the outset, that no provision is discerned in the legal-fiscal system that has expressly repealed it.

The only clear reference to such repeal is contained in the Government's Bill submitted to the Parliament, within the scope of the State Budget – Bill 478/2006, of 13 October 2006 – to the effect that the said Decree-Law 1/87, of 3 January be repealed, a proposal that was not approved.

It is therefore indisputable that the exemption contemplated therein is not expressly repealed.

It remains to ascertain whether perhaps tacit repeal has occurred, resulting, in particular, from the aforesaid amendments to article 46th (49th) of the EBF, by incompatibility between the new provisions and the preceding rules or by the circumstance that the new law regulates all the subject matter of the prior law (article 7th, no. 2 of the C. Civil).

It is advanced, from the outset, that neither by this route is such repeal perceived to have occurred, subscribing entirely to what was decided in arbitral decision No. 544/2016, of 28-04-2017, in which the claimant is the same as in the present proceedings: "quite the contrary, a joint reading of the new provision of article 46th of the EBF and the preceding rule of article 1st of Decree-Law No. 1/87, of 3 January, allows one reasonably to conclude that from the entry into force of the new version of article 46th of the EBF those who would be exempted from IMT would be, not only the acquisitions of real estate assets carried out by management companies of real estate investment funds with the intent that they become integrated into those funds – as established in the preceding rule – but also real estate integrated into real estate investment funds – as established in that article 46th of the EBF. In other words, the IMT exemption would henceforth apply both to real estate acquired to become integrated into real estate investment funds, as had been established until then, and to those same real estate if and while integrated into real estate investment funds, under the terms of article 46th of the EBF. In the first case, the exemption would be applicable whenever the fund was in the position of acquirer of the real estate. In the second case the exemption would be applicable whenever the fund was in the position of alienator of the real estate. Thus, it is necessary to conclude the non-existence of an incompatibility between the new provisions and the preceding rules".

More than that, "the exemption of the current article 49th of the EBF, even in its attenuated version of reduction of IMT rates by half, constitutes a non-negligible and non-redundant supplement relative to the exemption established by article 1st of Decree-Law No. 1/87, of 3 January. It is a structurally and teleologically distinct exemption from the latter, whose introduction and maintenance in the legal order rests on a distinct valuation of fiscal policy".

Concluding that "also taking into account the last of the criteria of article 7th, no. 2 of the Civil Code, it will be said that the mere introduction of the exemption of article 46th of the EBF can hardly be interpreted as a measure of repeal and substitution of the exemption created by article 1st of Decree-Law No. 1/87, of 3 January. On the one hand, it results from the preceding considerations that article 46th of the EBF did not come to regulate all the subject matter contained in article 1st of Decree-Law No. 1/87. In truth, a new exemption is introduced beyond the already existing, which remains untouched. On the other hand, the EBF does not have the monopoly of tax benefits, the same being able to be established and subsist in separate legislation. Think, for example, of the tax benefits contained in the Tax Code for Investment".

Whence it must be concluded that the exemption provided for in the said article 1st of Decree-Law 1/87, in the context of transfer tax and now of IMT (given what is established, as referred to, by Decree-Law 287/2003), is in force, from which it follows that acquisitions of real estate assets made for a real estate investment fund by the respective management company are exempted from IMT, as happens with those now in question.

The claimant is therefore correct, imposing itself to declare the illegality of the assessment acts contested.

INDEMNITY INTEREST

Beyond the restitution of the tax improperly paid, the claimant requests that the right to the payment of indemnity interest be declared.

Such right is established in article 43rd of the General Tax Code (LGT), which has as a precondition that it be ascertained, in administrative complaint or judicial challenge – or in tax arbitration – that there was error attributable to the services resulting in payment of the debt in an amount exceeding that legally due.

The recognition of the right to indemnity interest in the arbitral proceedings results from the provision in article 24th, no. 5 of RJAT, when it stipulates that "payment of interest is due, irrespective of its nature, under the terms provided in the general tax code and in the Code of Tax Procedure and Process".

In the case in question, error attributable to the AT occurred in the assessment in question which, on its own initiative, committed it without legal support.

Wherefore the claimant is correct to claim the payment of indemnity interest.

IV. DECISION

On these grounds, this Arbitral Tribunal decides:

a) To uphold the arbitral claim filed and, consequently, to declare the illegality of the tacit rejection of the administrative complaint submitted by the claimant, annulling the IMT assessment acts with numbers … and ….

b) To order the Tax and Customs Administration to refund to the claimant the amount of tax paid, plus the respective indemnity interest.

c) To order the Respondent to pay the costs of the proceedings.

V. VALUE OF PROCEEDINGS

The value of the proceedings is set at €71,500.00, under the terms of article 97th-A, no. 1, paragraph a), of the Code of Tax Procedure and Process, applicable by force of paragraphs a) and b) of no. 1 of article 29th of the Legal Regime of Tax Arbitration and no. 2 of article 3rd of the Regulation of Costs in Tax Arbitration Proceedings.

VI. COSTS

The arbitration fee is set at €2,448.00, under the terms of Table I of the Regulation of Costs in Tax Arbitration Proceedings, under the terms of articles 12th, no. 2, and 22nd, no. 4, both of the Legal Regime of Tax Arbitration, and article 4th, no. 4, of the said Regulation.

Let notification be made.

Lisbon, 26 June 2017.

The Presiding Arbitrator

(José Baeta de Queiroz)

The Arbitrator Member

(António Alberto Franco)

The Arbitrator Member

(Diogo Leite de Campos)

Frequently Asked Questions

Automatically Created

Are real estate investment funds (Fundos de Investimento Imobiliário) entitled to IMT tax exemptions or reduced rates under the Portuguese Tax Benefits Statute (EBF)?
Real estate investment funds historically enjoyed IMT exemptions under Decree-Law 1/87, but Article 49 of the Tax Benefits Statute (EBF) underwent progressive restrictions. By 2015, open and closed funds of public subscription received only a 50% rate reduction (not full exemption). The central legal dispute is whether the original Decree-Law 1/87 exemption survived subsequent legislative changes or was implicitly repealed by the evolving EBF framework that progressively limited benefits.
How does Article 49 of the Estatuto dos Benefícios Fiscais (EBF) apply to IMT rates for properties acquired by open-ended real estate investment funds?
Article 49 EBF (2015 version) provided that IMT rates were reduced to one half for real estate integrated into open or closed real estate investment funds of public subscription. This resulted in a 3.25% rate instead of the standard 6.5% rate for urban property transfers. The provision applies to properties acquired and integrated into qualifying funds, though the precise scope of 'integrated into' versus 'acquired by' funds was disputed in this case.
Can a taxpayer challenge IMT tax assessments through CAAD tax arbitration proceedings under Decree-Law 10/2011 (RJAT)?
Yes, taxpayers can challenge IMT assessments through CAAD tax arbitration under Decree-Law 10/2011 (RJAT). In this case, the claimant filed under Articles 2 and 10 of RJAT in conjunction with Article 102 of the Tax Procedure Code (CPPT), seeking declaration of illegality of the tacit rejection of their complaint against IMT assessments and requesting tax reimbursement plus compensatory interest.
What is the procedure for claiming a refund of IMT overpaid by a real estate investment fund and obtaining compensatory interest (juros indemnizatórios)?
To claim an IMT refund, the taxpayer must first file an administrative complaint (reclamação) against the assessment. If denied (expressly or tacitly), the taxpayer can initiate CAAD arbitration proceedings under RJAT, requesting declaration of illegality of the assessment, reimbursement of overpaid tax, and recognition of the right to compensatory interest (juros indemnizatórios) calculated from the date of undue payment until reimbursement.
Does the tacit rejection (indeferimento tácito) of an IMT reclamation entitle the taxpayer to file for arbitral review at CAAD?
Yes, the tacit rejection (indeferimento tácito) of an IMT reclamation entitles the taxpayer to file for arbitral review at CAAD. Tacit rejection occurs when the Tax Authority fails to respond to the complaint within the statutory deadline. This tacit administrative decision is legally equivalent to an express rejection and constitutes a challengeable act that can be contested through CAAD arbitration under Article 10 of RJAT.