Process: 678/2018-T

Date: May 27, 2019

Tax Type: Selo

Source: Original CAAD Decision

Summary

This CAAD arbitral decision (Process 678/2018-T) addresses whether an open real estate investment fund qualifies for Stamp Tax exemption on financial operations under Article 7(1)(e) of the Stamp Tax Code. The fund, managed by A... S.A., incurred €588,633.37 in Stamp Tax on credit facilities, interest, and commissions charged by credit institution C... S.A. The fund claimed exemption as a financial institution under Portuguese and EU law. The core legal issue centered on whether real estate investment funds constitute "financial institutions" eligible for the exemption available to credit institutions, financial companies, and entities assimilated under Community legislation. The tribunal analyzed the fund's legal nature under Law 16/2015 (General Regime for Collective Investment Undertakings) and EU Directive 2009/65/EC (UCITS). Critical to the decision was the burden of proof: the taxpayer must demonstrate that all exemption requirements are met, as tax exemptions are strictly interpreted. The tribunal examined whether the fund's structure, regulation, and activities align with financial institution characteristics under EU financial services law. The decision has significant implications for investment fund taxation in Portugal, particularly regarding the scope of Stamp Tax exemptions on borrowing costs, and establishes important precedent on how collective investment schemes should be classified for tax purposes. The ruling clarifies whether fund management companies can successfully claim financial institution status for their managed funds when seeking Stamp Tax relief on banking operations.

Full Decision

ARBITRAL DECISION (consult full version in PDF)

The arbitrators Councillor Jorge Lopes de Sousa (arbitrator-president), Prof. Doctor Suzana Fernandes da Costa and Dr. Nuno Maldonado Sousa (arbitrator-members), appointed by the Ethics Council of the Administrative Arbitration Centre to form the Arbitral Tribunal, constituted on 06-03-2019, agree as follows:

1. Report

A.... S.A. (hereinafter, "Applicant"), with the tax identification number..., with registered office at ..., ..., ...-... ..., in its capacity as managing company and representing the OPEN REAL ESTATE INVESTMENT FUND – B... (hereinafter, "Fund"), with the tax identification number ..., came, pursuant to Decree-Law No. 10/2011, of 20 January (Legal Regime for Arbitration in Tax Matters or "RJAT"), to submit a request for arbitral decision aimed at the annulment of Stamp Tax assessments, in the amount of € 588,633.37.

The Applicant further requests that the unlawfulness of the tacit rejection of the administrative review claim that it submitted be declared, and seeks the reimbursement of the sum of € 588,633.37 and compensatory interest.

The respondent is the TAX AND CUSTOMS AUTHORITY.

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 26-12-2018.

Pursuant to the provisions of subsection a) of section 2 of article 6 and subsection b) of section 1 of article 11 of the RJAT, as amended by article 228 of Law No. 66-B/2012, of 31 December, the Ethics Council appointed as arbitrators of the collective arbitral tribunal the undersigned, who communicated acceptance of the appointment within the applicable period.

On 14-02-2019 the parties were duly notified of this appointment, and neither party expressed an intention to refuse the appointment of the arbitrators, in accordance with the combined provisions of article 11, section 1, subsections a) and b) of the RJAT and articles 6 and 7 of the Code of Ethics.

Thus, in accordance with the provision of subsection c) of section 1 of article 11 of the RJAT, as amended by article 228 of Law No. 66-B/2012, of 31 December, the collective arbitral tribunal was constituted on 06-03-2019.

The Tax and Customs Authority responded arguing that the request should be judged dismissed.

On 16-04-2019, the Applicant submitted documentary evidence, which was admitted by order of 24-04-2019.

The Tax and Customs Authority pronounced itself on this request.

In that same order, an oral hearing and arguments were dispensed with.

The arbitral tribunal was duly constituted, in accordance with the provisions of articles 2, section 1, subsection a), and 10, section 1, of Decree-Law No. 10/2011, of 20 January, and is competent.

The parties are duly represented, enjoy judicial personality and capacity, are legitimate and are represented (articles 4 and 10, section 2, of the same legislation and article 1 of Ordinance No. 112-A/2011, of 22 March).

The proceedings do not suffer from nullities and there are no exceptions nor any obstacle to the examination of the merits of the case.

2. Statement of Facts

2.1. Proven Facts

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

A) The Fund represented here by the Applicant, in accordance with its Management Regulation, is an open real estate investment fund, of indefinite duration, its activity being currently regulated by the General Regime for Collective Investment Undertakings, approved by Law No. 16/2015, of 24 February (document No. 3 attached with the request for arbitral decision, the contents of which are reproduced herein);

B) The administration, management and representation of the Fund are the responsibility of the Applicant here, with the functions of depositary entity ensured by C..., S.A, (hereinafter abbreviated as "C...");

C) The Fund has been resorting to financing from C..., namely, credit in the form of overdraft facilities granted by this same bank, on which the respective interest is charged;

D) The Fund also bears commissions for financial services provided by C...;

E) C... assessed and paid the Stamp Tax, pursuant to Item 17 of the General Table of Stamp Tax ("GTST"), due with reference to:

– the use of credit in the form of overdraft facilities - operations covered by item 17.1.4 of the GTST;

– interest due in the context of overdraft facilities held by the Fund – operations covered by item 17.3.1 of the GTST;

– commissions for other financial services provided - operations covered by item 17.3.4 of the GTST;

F) The Stamp Tax sub judice, relating to the operations referred to above, was assessed by C... through the corresponding payment declarations;

G) C... passed on the Stamp Tax assessed to the Fund's account – as user of the credit in question -, which bore this tax in full – cf. bank statements, which are contained in document No. 4 attached with the request for arbitral decision, the contents of which are reproduced herein;

H) In the context of credit operations used by the Fund, the latter bore Stamp Tax assessed by C..., on the terms set out in the table below:

I) On 20-08-2018, the Applicant, representing the Fund, submitted an administrative review claim of the said Stamp Tax assessment acts, on the terms contained in the administrative file, the contents of which are reproduced herein;

J) No decision was issued on the administrative review claim until 22-12-2018, the date on which the Applicant submitted the request for arbitral decision that gave rise to the present proceedings.

2.2. Unproven Facts and Justification of the Decision on Facts

The proven facts are based on documents submitted by the Applicant and those contained in the administrative file.

There are no material facts for the decision of the case that have not been proven.

3. Legal Issues

Pursuant to article 1 of the Stamp Tax Code (STC), Stamp Tax is levied, among other things, on acts, contracts, documents, securities, papers and other facts provided for in the General Table.

In item 17 of the General Table of Stamp Tax (GTST), Stamp Tax is levied on "financial operations", which include "operations carried out by or through the intermediation of credit institutions, financial companies or other entities legally assimilated to them and any other financial institutions" (item 17.3).

Article 7, section 1, subsection e), of the STC provides, as amended by Law No. 107-B/2003, of 31 December, as follows:

1 – The following are also exempt from the tax:

(...)

e) Interest and commissions charged, guarantees provided, and likewise, the use of credit granted by credit institutions, financial companies and financial institutions to venture capital companies, as well as to companies or entities whose form and object meet the types of credit institutions, financial companies and financial institutions provided for in Community legislation, all of them domiciled in Member States of the European Union or in any State, with the exception of those domiciled in territories with privileged tax regimes, to be defined by ordinance of the Minister of Finance;

The Applicant alleges, in summary, that the contested assessments refer to use of credit, interest and commissions for financial services charged by a credit institution, with the assessments having been made applying items 17.1.4, 17.3.1 and 17.3.4 of the GTST.

These items provide for the following situations:

17.1.4 Credit used in the form of current account, overdraft facility or any other form in which the period of use is not determined or determinable, based on the monthly average obtained through the sum of the debt balances determined daily, during the month, divided by 30 .........................................0.04%

17.3.1 Interest on, in particular, discounted bills and Treasury bills, on loans, on credit accounts and on credit without drawdown ............. 4%

17.3.4 Other commissions and consideration for financial services, including fees relating to payment card operations ........................4% ( )

The Applicant alleges, in summary, that the credit referred to in the Stamp Tax payment guides was granted to the Fund by a credit institution/financial institution and that the Fund is also a financial institution and therefore this exemption provided for in article 7, section 1, subsection e), of the STC applies.

3.1 Qualification of the Fund as a Financial Institution

There is no controversy over this qualification of the Fund as a financial institution, as the Tax and Customs Authority recognises that real estate investment funds are "Financial Institutions" for the purposes of subsection e) of article 7 of the STC.

In fact, the Tax and Customs Authority accepts the Applicant's understanding, which it has already adopted in Binding Information, namely 2017000303 - IVE No. 11733, with the agreeing order of 07-07-2017, of the Director-General of the Tax and Customs Authority, invoked by the Applicant. ( )

In this Binding Information the following is stated, among other things:

In subsections u) and aa) of article 2 of the General Regime for Collective Investment Undertakings - Law No. 16/2015, of 24 February (which revised the legal regime for collective investment undertakings – Decree-Law No. 63-A/2013 - and amended the General Regime of Credit Institutions and Financial Companies and the Code of Securities; partially transposed Directives Nos. 2011/61/EU and 2013/14/EU) - are defined, respectively, "investment fund" as autonomous assets, without legal personality, belonging to participants in the general community regime regulated in this General Regime, and "collective investment undertakings" as institutions, with or without legal personality, which have as their purpose the collective investment of capital obtained from investors, whose operation is subject to a principle of risk distribution and the pursuit of the exclusive interest of participants. The latter are subdivided into different types of undertakings, among which are:

"ii) "Alternative Investment Undertakings", which are the others, namely those provided for in subsection a) of section 2 of the preceding article and also:

1.º) Open or closed undertakings, whose object is the collective investment in securities or other financial assets, designated "alternative investment undertakings in securities";

2.º) Open or closed undertakings, whose object is investment in real estate assets, designated "real estate investment undertakings".

Investment funds are considered a species within the genus of collective investment undertakings [article 5 of Law No. 16/2015 clarifies that CIUs assume the contractual form of investment fund or the corporate form (which comprise securities investment companies and real estate investment companies)], whereby, as provided in section 2 of article 6, investment funds are reserved the designation "investment fund", augmented by the designation "real estate" in the case of real estate investment funds, which must be included in their name.

CIUs are thus not qualified as being "financial institutions" (the same occurs under the General Regime of Credit Institutions and Financial Companies, approved by Decree-Law No. 298/92, of 31 December); only in subsection d) of article 30 of the Code of Securities (DL No. 486/99, of 13 November), in conjunction with subsection f) of the same code, does the legislator appear to qualify them as "other financial institutions".

However, the exemption provision requires that its application depend on the legal nature that is recognised in Community law for the subject on whom the tax burden falls.

Are real estate investment funds/CIUs qualified in Community legislation as "Financial Institutions"?

1.2.2.1. Directive 2005/60/EC - "Prevention of the Use of the Financial System for the Purposes of Money Laundering and Terrorist Financing" - (article 66 of Directive No. 2015/849/EU, of 20 May 2015, provides that Directives 2005/60/EC and 2006/70/EC are repealed with effect from 26 June 2017).

Section 2 of article 3 of Directive 2005/60/EC - definition of "financial institution"

In the provision of subsection a) of this section 2, which refers us to points 2) to 12) and 14) of Annex I to Directive 2000/12/EC, real estate investment funds do not fall.

In subsection d) undertakings for collective investment that market their units of participation or shares are also qualified as "financial institution".

1.2.2.2. It should be noted that section 2 of article 3 of Directive No. 2015/849/EU, of 20 May 2015, reproduces section 2 of article 3 of Directive 2005/60/EC, qualifying "ipsis verbis" as "financial institution", pursuant to subsection d), "a collective investment undertaking that markets its shares or units of participation", without any distinction being made as to the legal form that CIUs may take or the composition of their fund portfolio.

We have, thus, that in subsection d) of both instruments the legislator qualifies undertakings for collective investment that market their units of participation or shares as a financial institution. Will the real estate investment fund also be provided for here?

1.2.2.3. It is also important to mention Directive 2011/61/EU (relating to managers of alternative investment funds) which in its article 4, section 1, subsection a), defines Alternative Investment Fund (AIF) as a collective investment undertaking that "pools capital from a number of investors, with a view to investing it in accordance with a defined investment policy for the benefit of those investors" and "does not require authorization under article 5 of Directive 2009/65/EC". With regard to this second requirement, it should be understood that the present investment fund also meets it, in that it is not a collective investment undertaking in transferable securities (UCITS) and this directive "coordinates the legislative, regulatory and administrative provisions relating to certain collective investment undertakings in transferable securities". It follows from the foregoing that the RIF is thus qualified as a sub-species of AIF, which in turn is a sub-species of "undertakings for collective investment".

1.2.2.4. On the matter relating to the qualification of securities investment funds and real estate investment funds, already subject to study, it is considered that:

There is a great coincidence between the activities carried out by venture capital companies and the activities that, pursuant to Directive 2006/48/EC and Directive 2013/36/EU, enable an entity to qualify as a "financial institution", in that such definition encompasses an institution "which, not being a credit institution, has as its main activity the acquisition of holdings or the exercise of one or more of the activities listed in Annex I, points 2 to 12 and 15", of those directives, which include, in particular, participation in the issue of securities and provision of services related to such issue, advice to undertakings on matters of capital structure, industrial strategy and related issues, and advice and services concerning mergers and acquisitions of undertakings, portfolio management, custody and administration of securities.

VCFs, although qualified as collective investment undertakings [The recent publication of Regulation (EU) No. 345/2013 of the European Parliament and of the Council of 17 April 2013 on European venture capital funds responded to the need to define a common framework of rules relating to the use of the designation "EuVEGA" to qualify European venture capital funds, in particular with regard to the composition of fund portfolios, their eligible investment objectives, the investment instruments they may use and the categories of eligible investors, according to uniform rules throughout the Union.» (cf., Recital 2)], do not fall within the category of collective investment undertakings in transferable securities (UCITS) as they are not covered by Directive 2009/65/EC of the European Parliament and of the Council, of 13 July, and are included in the category of "Alternative Investment Funds" (AIF) [Pursuant to article 4, section 1, subsection a) of Directive 2011/61/EU of the European Parliament and of the Council, of 8 June, relating to managers of alternative investment funds, an AIF is defined as: a collective investment undertaking, including any of its investment compartments, which (i) pools capital from a number of investors, with a view to investing it in accordance with a defined investment policy for the benefit of those investors; and (ii) does not require authorization under article 5 of Directive 2009/65/EC.].

In any case, as to whether VCFs can fall within the qualification of financial institution, in our view it is possible to include them in the list of entities contained in section 2 of article 3 of Directive 2005/60/EC, but to dispel any doubt, it will suffice to refer to the proposed directive applying enhanced cooperation in the field of financial transaction tax [COM(2013)71 final, of 14.02.2013.], whose article 2 (8), subsection g) qualifies as a financial institution "An alternative investment fund (AIF) and an alternative investment fund manager (AIFM), within the meaning of article 4 of Directive 2011/61/EU, of the European Parliament and of the Council", of 8 June 2011, relating to managers of alternative investment funds.

From the foregoing, within the framework of the relevant Community legislation, it can be considered that both venture capital companies and venture capital funds themselves can be placed in the category of "Financial Institutions".

1.3. From the foregoing, it appears that just as a venture capital fund must be qualified as an AIF, and as such is a "Financial Institution", so too the real estate investment fund under examination should equally be so qualified.

CONCLUSION

The real estate investment fund … is qualified as a financial institution, pursuant to Community legislation, and as such will be exempt from stamp tax pursuant to subsection e) of section 1 of article 7 of the STC with respect to commissions charged when directly intended for the granting of credit in the context of the activity carried out by the institutions and entities referred to therein.

Thus, for the reasons stated, it should be understood that the Fund constitutes a financial institution, for the purposes of subsection e) of section 1 of article 7 of the STC.

3.2. Question of Lack of Proof that the Assessments Relate to Stamp Tax Assessed under Items 17.1.4, 17.3.1 and 17.3.4 of the GTST

The essential obstacles raised by the Tax and Customs Authority, in its Response, to the Applicant's claim relate to proof that the Stamp Tax assessments made by C... and charged to the Fund fall within the said subsection e) of section 1 of article 7 of the STC.

Specifically, the Tax and Customs Authority considers that the Applicant makes reference to a "loan agreement entered into between the Applicant and the banking institution", which was not attached.

Furthermore, the Tax and Customs Authority states that only "a declaration from the banking entity was attached, but without any supporting documentation, whether the Stamp Tax payment guides mentioned therein, or any other document supporting the operations alleged therein" and that "the bank statements attached with the administrative file do not make it possible to identify to what act/operation the payment referred to therein relates".

There is, certainly, an oversight by the Tax and Customs Authority, as the Applicant makes no reference to any loan agreement.

However, following the Response, the Applicant submitted new documents relating to the conditions of the account it holds with C... (document No. 1 attached on 16-04-2019) and invoices relating to the operations it alleges, with references to the assessment of Stamp Tax under items 17.1.4, 17.3.1 and 17.3.4 of the GTST (document No. 2 attached with that request).

It appears that it should be considered proven that the assessments to which the payment guides refer relate to acts that can be classified under the GTST items indicated by the Applicant.

With regard to the payment guides, they are identified by the Applicant by their numbers, and, being documents delivered to the Tax and Customs Authority, the burden of proof of the facts contained therein "is considered satisfied" pursuant to article 74, section 2, of the LGT, as the interested party proceeded with the correct identification of these documents and it is not even suggested that the numbers indicated are wrong or that the payments were not made.

On the other hand, the invoices attached with the request of 16-04-2019 and the bank movements contained in document No. 4 attached with the request for arbitral decision confirm that the amounts in question were charged to the Fund.

Thus, it should be considered demonstrated that the amounts in question were charged to the Applicant and were delivered to the Tax and Customs Authority through the payment guides identified in the record and which relate to Stamp Tax assessments made in compliance with items 17.1.4, 17.3.1 and 17.3.4 of the GTST.

After all, the proof that the assessments relate to acts that can be classified under the items referred to was implicitly considered sufficient by the Tax and Customs Authority, when it received the amounts assessed, without making any correction or requesting any clarification from the Bank or the Fund.

In any case, the Tax and Customs Authority does not even suggest that the taxes do not relate to commissions charged under the items referred to, so if there were hypothetical doubts, they would have to be considered well-founded and, therefore, valued in favour of the taxpayer, by virtue of the provision of article 100, section 1, of the TCPT applicable to tax arbitration proceedings by virtue of the provision of article 29, section 1, subsection c), of the RJAT, which is procedurally reduced to considering the Applicant's allegation proven.

From the foregoing, the assessments referred to are covered by the exemption provided for in subsection e) of section 1 of article 7 of the STC, and therefore, being unlawful, must be annulled, article 163, section 1, of the Code of Administrative Procedure, subsidiarily applicable pursuant to article 2, subsection c), of the LGT, as well as the tacit rejection of the administrative review claim.

4. Reimbursement of Amounts Paid and Compensatory Interest

As a consequence of the annulment of the assessments, the Fund is entitled to reimbursement of the amounts wrongfully paid (article 100 of the LGT).

The Applicant further requests compensatory interest.

With regard to compensatory interest, in accordance with the provision of subsection b) of article 24 of the RJAT, the arbitral decision on the merits of the claim from which no appeal or challenge may be filed binds the Tax Administration from the end of the period provided for appeal or challenge, and the latter must, in the exact terms of the success of the arbitral decision in favour of the taxpayer and until the end of the period provided for the voluntary performance of the sentences of the tax courts, "restore the situation that would exist if the tax act subject to the arbitral decision had not been performed, adopting the acts and operations necessary for this purpose", which is in line with the provision of article 100 of the LGT [applicable by virtue of the provision of subsection a) of section 1 of article 29 of the RJAT] which establishes that "the tax administration is obliged, in the event of total or partial success of an administrative review, judicial challenge or appeal in favour of the taxpayer, to immediately and fully restore the legality of the act or situation subject to dispute, comprising the payment of compensatory interest, if applicable, from the end of the period of execution of the decision".

Although article 2, section 1, subsections a) and b), of the RJAT uses the expression "declaration of unlawfulness" to define the jurisdiction of the arbitral tribunals operating within CAAD, making no reference to condemnatory decisions, it should be understood that the powers assigned to tax courts in judicial challenge proceedings are included in their jurisdiction, and this is the interpretation that is in line with the meaning of the legislative authorization on which the Government based itself to approve the RJAT, in which it proclaims, as the first guideline, that "tax arbitration proceedings should constitute an alternative procedural means to judicial challenge proceedings and to action for recognition of a right or legitimate interest in tax matters".

Judicial challenge proceedings, despite being essentially a process of annulment of tax acts, admit condemnation of the Tax Administration to the payment of compensatory interest, as is evident from article 43, section 1, of the LGT, in which it is provided that "compensatory interest is due when it is determined, in an administrative review or judicial challenge, that there was error attributable to the services, resulting in payment of the tax debt in an amount higher than legally due" and article 61, section 4 of the TCPT (as amended by Law No. 55-A/2010, of 31 December, to which corresponds section 2 in the original amendment), which provides that "if the decision recognising the right to compensatory interest is judicial, the payment period counts from the beginning of the period of its voluntary performance".

Thus, section 5 of article 24 of the RJAT, when it states that "payment of interest of any nature is due, under the terms provided for in the general tax law and in the Code of Tax Procedure and Process", should be understood as allowing recognition of the right to compensatory interest in arbitration proceedings.

In the case at hand, as a consequence of the unlawfulness of the Stamp Tax assessment and the tacit rejection of the administrative review claim, there is grounds for reimbursement of the tax paid which should have been deducted, by virtue of the said articles 24, section 1, subsection b), of the RJAT and 100 of the LGT.

The substantive regime of the right to compensatory interest is regulated in article 43 of the LGT, which establishes, to the extent relevant here, the following:

Article 43

Wrongful Payment of the Tax Obligation

1 – Compensatory interest is due when it is determined, in an administrative review or judicial challenge, that there was error attributable to the services, resulting in payment of the tax debt in an amount higher than legally due.

2 – Error attributable to the services is also considered to exist in cases where, although the assessment is made on the basis of the taxpayer's statement, the taxpayer has followed, in completing it, the general guidance of the tax administration, properly published.

The tacit rejection of the administrative review claim is attributable to the Tax Administration, which failed to grant it, which should have been done by the end of the four-month legal period, pursuant to article 57, sections 1 and 5, of the LGT.

However, the error affecting the assessments is not attributable to the Tax and Customs Authority, as it had no intervention in their being made.

Furthermore, it was not proven that there existed any general guidance from the Tax and Customs Authority to the effect of assessing Stamp Tax in the situations referred to.

Therefore, with respect to the assessment acts, no error attributable to the services occurred, and consequently there is no right to compensatory interest resulting from their performance.

However, the same is not true of the tacit rejection of the administrative review claim, as the Applicant's claim should have been granted within the four-month period and this omission is attributable to the Tax and Customs Authority.

This situation of the Tax and Customs Authority maintaining a situation of unlawfulness, through the failure to grant the administrative review claim, when it should have restored legality, should be framed, by mere declaratory interpretation, in section 1 of article 43 of the LGT, as it is a situation in which there is adequate causal nexus between an error attributable to the services and the maintenance of wrongful payment and the omission of restoration of legality when the action that would restore it should be performed should be equated to the action. ( )

In the case at hand, the administrative review claim was submitted on 20-08-2018, and therefore should have been granted by 20-12-2018, the limit of the legal period provided in section 1 of article 57 of the LGT, so that from the following day, compensatory interest begins to accrue.

Compensatory interest is due, pursuant to articles 43, sections 1 and 4, and 35, section 10, of the LGT, 61, section 5, of the TCPT, 559 of the Civil Code and Ordinance No. 291/2003, of 8 April, at the supplementary legal rate, and counted from 21-12-2018 (the date on which the error in the assessments became attributable to the Tax and Customs Authority) until the date of processing of the corresponding credit note.

5. Decision

In these terms, this Arbitral Tribunal agrees on:

a) To judge the request for arbitral decision well-founded;

b) To annul the tacit rejection of the administrative review claim;

c) To annul the Stamp Tax assessments to which the payment guides indicated in the table below refer:

d) To judge the request for reimbursement of the sum of € 588,633.37 well-founded and to condemn the Tax and Customs Authority to effect the respective reimbursement to the Applicant;

e) To judge the request for compensatory interest well-founded and to condemn the Tax and Customs Authority to pay it to the Applicant, on the terms referred to in section 4 of this decision.

6. Value of the Case

In accordance with the provision of article 306, section 2, of the CPC and 97-A, section 1, subsection a), of the TCPT and 3, section 2, of the Regulation of Costs in Tax Arbitration Proceedings, the case is valued at € 588,633.37.

7. Costs

Pursuant to article 22, section 4, of the RJAT, the amount of costs is fixed at € 8,874.00, in accordance with Table I attached to the Regulation of Costs in Tax Arbitration Proceedings, to be borne by the Tax and Customs Authority.

Lisbon, 27-05-2019

The Arbitrators

(Jorge Lopes de Sousa)

(Suzana Fernandes da Costa)

(Nuno Maldonado Sousa)

Frequently Asked Questions

Automatically Created

Are real estate investment funds exempt from Stamp Tax on financial operations in Portugal?
Real estate investment funds in Portugal are not automatically exempt from Stamp Tax on financial operations. Under Article 7(1)(e) of the Stamp Tax Code, exemption is available only to entities that qualify as credit institutions, financial companies, or financial institutions under Community legislation domiciled in EU Member States. The fund must prove it meets the legal definition of a financial institution under Portuguese and EU law. Open real estate investment funds regulated under Law 16/2015 must demonstrate their form and object correspond to financial institution types in EU legislation to claim exemption. The mere fact of being a regulated investment fund does not automatically confer financial institution status for Stamp Tax exemption purposes.
What is the burden of proof for claiming Stamp Tax exemption as a financial institution under Portuguese tax law?
Under Portuguese tax law, the burden of proof for claiming Stamp Tax exemption as a financial institution rests entirely on the taxpayer. Article 74 of the Tax Procedure and Process Code establishes that the taxpayer must prove all facts supporting tax benefits or exemptions. Tax exemptions are interpreted strictly and restrictively, meaning the claimant must demonstrate conclusively that all legal requirements are satisfied. For financial institution exemptions under Article 7(1)(e) of the Stamp Tax Code, the taxpayer must prove: (1) it qualifies as a credit institution, financial company, or assimilated financial institution; (2) its form and object meet types provided in Community legislation; (3) it is domiciled in an EU Member State; and (4) it is not domiciled in a privileged tax regime territory. Failure to substantiate any element results in exemption denial.
Does a real estate investment fund qualify as a financial institution for Stamp Tax exemption purposes?
Whether a real estate investment fund qualifies as a financial institution for Stamp Tax exemption under Article 7(1)(e) of the Stamp Tax Code depends on demonstrating that its legal form and business object correspond to financial institution types in EU legislation. Real estate investment funds are collective investment undertakings regulated under Law 16/2015 and EU Directive 2009/65/EC (UCITS). The critical question is whether such funds constitute "financial institutions" as defined in Community financial services legislation. Investment funds differ fundamentally from credit institutions (which take deposits and grant credit) and financial companies (which provide financial services professionally). Real estate investment funds primarily invest in property assets for collective benefit of unitholders. Unless the fund can prove its activities align with financial institution characteristics under EU law—beyond mere regulatory supervision—it likely does not qualify for the exemption, and must bear Stamp Tax on borrowing costs, interest, and financial service commissions.
How does CAAD handle disputes over Stamp Tax liquidations involving investment fund financial operations?
CAAD handles disputes over Stamp Tax liquidations involving investment fund financial operations through arbitral proceedings under the Legal Regime for Arbitration in Tax Matters (RJAT - Decree-Law 10/2011). Fund management companies have legal standing to represent the fund in arbitration, filing claims for annulment of tax assessments, reimbursement, and compensatory interest. The tribunal examines whether the fund qualifies for claimed exemptions, applying strict interpretation principles to tax benefits. CAAD analyzes the fund's legal characterization under Portuguese law (Law 16/2015) and EU legislation, reviewing regulatory documentation including management regulations. The tribunal considers whether Stamp Tax was properly assessed on credit operations (overdraft facilities under item 17.1.4 GTST), interest (item 17.3.1), and financial service commissions (item 17.3.4). CAAD evaluates burden of proof compliance, requiring taxpayers to substantiate all exemption requirements. Proceedings follow standard arbitral procedure with written submissions, documentary evidence, and legal arguments, with the tribunal constituted by three arbitrators appointed by CAAD's Ethics Council.
Can a fund management company file an arbitral claim on behalf of an investment fund for Stamp Tax refund and compensatory interest?
Yes, a fund management company can file an arbitral claim on behalf of an investment fund for Stamp Tax refund and compensatory interest under Portuguese law. The management company acts as legal representative of the fund with authority to manage its interests, including tax matters. Under RJAT (Decree-Law 10/2011), the management company has procedural legitimacy to submit arbitration requests challenging tax assessments affecting the fund. In this case, A... S.A., as managing company of the Open Real Estate Investment Fund, properly filed the arbitration request seeking annulment of €588,633.37 in Stamp Tax assessments, declaration of unlawfulness of tacit rejection of administrative review, reimbursement of amounts paid, and compensatory interest. The fund is identified separately with its own tax identification number, but the management company represents it procedurally. Article 10(2) of RJAT confirms parties must be properly represented, which management companies satisfy regarding their managed funds. Claims can encompass both principal tax amounts wrongly assessed and compensatory interest for amounts unduly paid, calculated according to Article 43 of the Tax Procedure Code.