Summary
Full Decision
ARBITRAL DECISION
The arbitrators Judge José Poças Falcão (presiding arbitrator), Dr. Augusto Vieira and Dr. Arlindo José Francisco (arbitrator members), appointed by the Deontological Council of the Centre for Administrative Arbitration to form the Arbitral Tribunal, hereby agree as follows:
I – REPORT
On 22 December 2018, A..., S.A. (Claimant), with tax identification number..., with registered office at Avenue..., ..., ...-... ..., in its capacity as management company and in representation of B... (hereinafter, "Fund"), with tax identification number..., submitted a request for arbitral decision, pursuant to the provisions of article 2, no. 1, paragraph a) and article 10, nos. 1 and 2, both of Decree-Law no. 10/2011, of 20 January (Legal Regime of Arbitration in Tax Matters or "RJAMT") and of articles 1 and 2 of Ordinance no. 112-A/2011, of 22 March, with the Tax and Customs Authority - ATA (hereinafter, Respondent or AT) as Respondent, with a view to a ruling on the partial illegality of the assessments of Stamp Duty of item 17.3.1 of the TGIS, which it supported while de facto taxpayer, in the period from July 2016 to June 2018, requesting the following:
"That the illegality of the decision of dismissal (by silence) in the context of the Gracious Complaint procedure initiated by the present Claimant be declared;
That the acts of Stamp Duty assessment be partially annulled, because illegal, due to manifest error in the factual and legal assumptions, in the amount of € 89,639.09;
That the amount of Stamp Duty improperly borne be reimbursed based on the tax acts sub judice;
That the Tax and Customs Authority be condemned to pay compensatory interest, at the legal rate, counted from the moment of the (improper) payment of the amount of € 89,639.09 until complete reimbursement of the amount owed and calculated on the tax".
The Claimant submits that it benefits from the exemption provided in paragraph e) of no. 1 of article 7 of the Stamp Duty Code, as it is a "financial institution", as a venture capital fund, according to Community law and on the grounds that the interest on which stamp duty was levied results from credit operations granted to it by a banking institution domiciled in Portugal.
The request for tribunal constitution was accepted by the President of CAAD on 22 December 2019 and followed its normal procedural course with notification of the ATA on 26 of the same month.
The President of the Deontological Council of CAAD appointed as arbitrators of the collective Arbitral Tribunal the signatories, who communicated acceptance of the appointment within the applicable time limit, which was notified to the parties, who did not manifest any will to refuse such appointment, pursuant to the combined provisions of article 11, no. 1, paragraphs b) and c) of RJAT and articles 6 and 7 of the CAAD Deontological Code.
In accordance with the provisions of article 11, no. 1, in paragraph c) of RJAT, the collective Arbitral Tribunal was constituted on 06 March 2019.
The Claimant supports its position, in summary, as to the illegality of the aforementioned tax acts, on the fact that the Fund represented here falls within the concept of financial institution, as provided in Community legislation, meeting all the requirements to benefit from the exemption referred to in paragraph e) of no. 1 of article 7 of the Stamp Duty Code.
In this sense it cites opinion no. 25/2013 of the Tax Study Centre and the fact that the AT itself, in the analysis of requests for binding information, has concluded for the application of the rule of paragraph e) of no. 1 of article 7 of the CIS to Venture Capital Funds, and therefore the acts of assessment are illegal, the ATA should proceed to their annulment, with the consequent reimbursement of improperly paid tax, plus compensatory interest under articles 43 and 100 of the General Tax Law.
On 10 April 2019, the Respondent, duly notified for that purpose, filed a Reply in which it contested the arguments raised by the Claimant, concluding that the present action is without merit.
The Respondent supports its position, also in summary, on the fact that there are no additional statements presented to the ATA that allow it to conclude with accuracy that the tax now contested even relates to the values entered in the stamp duty payment slips delivered, corresponding to the periods in question - 2016 to 2018.
The AT recognises that the Claimant is one of the entities that benefit from the exemption of paragraph e) of no. 1 of article 7 of the CIS, as it is a "financial institution".
But it contends that the "Claimant does not prove that we are dealing with stamp duty levied under the terms of the aforementioned exemption rule, ... notwithstanding the reference in the ppa to the loan contracts concluded between the Claimant and the banking institution, such documentation is not submitted by the Claimant". It adds that: "... only submits a statement from the banking entity, but without any documentary support, whether the stamp duty payment slips mentioned there, or any other document supporting the operations alleged there". And as regards the "... bank statements attached to the ppa do not allow identification of what act/operation the payment referred to there relates to". It adds that in the case of the "... binding information submitted by the Claimant as document no. 5 of the ppa, additional elements were precisely requested by the AT that would allow the fees charged by the lending entities to be qualified as "directly intended" for the granting of credit, such as the constitutive contracts of the financings". It concludes: "... having the Claimant not submitted copies of the constitutive contracts of the financings in question, with identification of the terms and any possibilities of changes to those terms, in order to clearly identify the nature of the commissions and interest connected with such operations and their imputation to their respective terms, the application of the aforementioned exemption provided in paragraph e) of no. 1 of article 7 of the CIS is not proven" and "... that the stamp duty payment slips, even if they had been submitted, would not prove sufficient to demonstrate that they relate to stamp duty relating to those operations/entity liable for the tax, since they only mention an aggregate value", that is "... there are no additional statements presented to the AT that allow it to conclude with accuracy that the tax now contested even relates to the values entered in the stamp duty payment slips delivered, corresponding to the periods in question - 2016 to 2018".
With the arguments referred to above, the AT contends that the request should be judged as without merit.
As to the request for compensatory interest, even if by mere hypothesis the tax were to be annulled, the AT considers that the same are not due, since the conditions provided in paragraph c) of no. 3 of article 43 of the General Tax Law are not met.
II. PRELIMINARY MATTERS
The Arbitral Tribunal was duly constituted and is competent ratione materiae, given the nature of the object of the proceedings (see articles 2, no. 1, paragraph a) and 5 of RJAT).
The request for arbitral decision is timely, as it was submitted within the time limit provided for in article 10, no. 1, paragraph a) of RJAT.
The parties have legal standing and capacity, have legitimacy and are duly represented (see articles 4 and 10, no. 2 of RJAT and article 1 of Ordinance no. 112-A/2011, of 22 March).
Pursuant to an order of 25 April last, the meeting provided for in article 18 of RJAT was dispensed with, the joinder of documents requested by the claimant on 16/04/2019 was admitted, and a period of 20 days was granted for further submissions.
The Respondent, in a request of 02/5/2019, stated that in terms of further submissions, it referred to what was stated in its Reply and made pronouncements on the documents joined on 25 April last by the claimant, considering them insufficient for the proof sought, reiterating that in the event of merit in the request there is no place for the payment of compensatory interest and the costs should be borne by the Claimant, as it gave rise to them.
The proceedings do not suffer from any nullities, no exceptions or preliminary issues having been raised that would prevent consideration of the merits, nor which it is necessary to consider.
III. REASONING
Issues to be resolved
Whether or not there is place for the declaration of illegality of the dismissal by silence presumed in the context of the complaint filed against the tax acts here called into question.
Whether or not the acts of assessment of stamp duty here impugned should be declared illegal due to non-conformity with the exemption rule of paragraph e) of no. 1 of article 7 of the CIS and, if affirmatively, the tax in the amount of € 89,639.09 should be annulled.
Whether, in the event of annulment of the aforementioned tax and its consequent reimbursement, the same should or should not be accompanied by the payment of compensatory interest as requested and from what date.
Matter of Fact
B..., with tax identification number ..., is a special closed real estate investment fund or closed real estate investment organism, of determined duration, constituted by private subscription, its respective activity being regulated by the General Regime of Collective Investment Organisms, approved by Law no. 16/2015, of 24 February – as per article 15 of the request for arbitral decision (PPA), article 2 of the AT's Reply and document no. 3 attached to the PPA;
The constitution of the Fund was authorised by a resolution of the Securities Market Council of 16 March 2006, having commenced its activity on 16 May of the same year and has as its objective the integrated and professional management of the real estate assets of the National Association of Pharmacies and companies participated in by it with a view to creating conditions for profitability, security and liquidity – as per articles 16 and 17 of the PPA and the lack of specific challenge of these facts by the AT assessed under the terms of article 110-7 of CPPT;
The administration, management and representation of the Fund is carried out by the Claimant A..., S.A. NF ... and the functions of depositary entity are ensured by Bank C... – as per article 18 of the PPA and article 3 of the AT's Reply;
In the period between July 2016 and June 2018, the Fund bore, as de facto taxpayer (holder of the economic interest under the terms of paragraph f) of no. 1 of article 3 of the CIS) stamp duty of item 17.3.1 of the TGIS, in the amount of 89,639.09 euros, as per the following table:
– as per article 24 of the PPA, Documents no. 2 and 4 attached to the PPA and document no. 3 attached with the Claimant's request of 16.04.2019, assessed under the terms of article 110-7 of CPPT.
The tax borne by the Fund resulted from financings granted to it, in the development of its activities, by C..., through loan contracts no. ... and no.... – as per Documents nos. 2 and 4 attached to the PPA, document no. 3 attached with the Claimant's request of 16.04.2019 and article 24 of the PPA;
On 20 August 2018 the Claimant filed with the AT a gracious complaint with a view to annulling the stamp duty assessments referred to in 4. above, having obtained no decision from the Respondent entity – as per the initial part of the PPA and article 4 of the AT's reply;
On 22 December 2018 the Claimant delivered to CAAD the present request for arbitral decision – as per registration in the CAAD's SGP.
3. Reasoning for the Establishment of the Matter of Fact
As to the matter of fact, the Tribunal does not have to pronounce on everything that was alleged by the parties, it being its duty, rather, to select the facts that matter for the decision and to distinguish the proven facts from the unproven ones (as per article 123, no. 2 of CPPT and article 607, no. 3 of CPC, applicable ex vi article 29, no. 1, paragraphs a) and e) of RJAT).
In this way, the facts relevant to the adjudication of the case are chosen and delimited in function of their legal relevance, which is established in light of the various plausible solutions of the question(s) of law (as per former article 511, no. 1 of CPC, corresponding to the current article 596, applicable ex vi article 29, no. 1, paragraph e) of RJAT).
Thus, taking into account the positions taken by the parties and the documentary evidence produced, the facts listed above were considered proven, with relevance for the decision, and, for each point brought to the matter of established fact, the means of proof that were considered relevant are indicated, as reasoning.
With relevance for the consideration and decision of the case, we consider the non-existence of unproven facts.
4. Matter of Law
Presumption of Dismissal by Silence
According to the facts proven, on 20 August 2018 the Claimant filed a gracious complaint with the AT with a view to annulling the stamp duty assessments here in question and on 22 December 2018 delivered to CAAD the present request for arbitral decision.
It is also established that the AT did not produce any decision before the Claimant delivered the request for arbitral decision.
In accordance with no. 1 of article 57 of the LGT "the tax procedure must be concluded within the period of four months" and under the terms of no. 3 of the same legal provision "in tax procedure the periods are continuous and are counted according to the Civil Code".
The gracious complaint is presumed dismissed for the purpose of judicial challenge after the expiry of the legal period for a decision by the competent body (article 106 of CPPT).
Thus, under the terms of paragraph c) of article 279 of the Civil Code, on 20 December 2018 the presumption of dismissal by silence of the gracious complaint was formed, which allowed the Claimant, on 22 December 2018, to submit the present request for arbitral decision under the terms of paragraph d) of no. 1 of article 102 of CPPT, within the period of 90 days (paragraph a) of no. 1 of RJAT), counted from the date on which the aforementioned silent act was formed.
The Exemption Rule of Paragraph e) of No. 1 of Article 7 of the CIS. The Alleged Illegality of the Act of Dismissal by Silence and of the Stamp Duty Assessments
Do the stamp duty assessments challenged by the Claimant suffer from non-conformity with the exemption rule of paragraph e) of no. 1 of article 7 of the CIS?
The Respondent, while not having pronounced itself within the legal period on the gracious complaint, now places, in the Reply to the PPA, as an obstacle to its merit that the Claimant did not attach the loan contracts concluded with the Bank and that the bank statements attached do not allow identification of what act/operation the payment referred to in the stamp duty payment slips relates to.
But it does not appear to us that it has reason. Even without the attachment of the constitutive instruments of the bank loans, Document no. 2 attached to the PPA and which was submitted by the Claimant with the gracious complaint, which is a declaration from the depositary and lending bank, is clear on the essential elements that would have allowed the AT to have a global view of the stamp duty that was levied on the Real Estate Fund here in question.
The depositary bank is the de jure taxpayer of the tax (the de facto taxpayer, who bears the tax, being the Fund itself) and its declaration cannot fail to be an element of the greatest relevance.
If the AT had doubts about the truthfulness of what was declared by the de jure taxpayer itself: the depositary and lending Bank (which is the one who has to make the assessment, collection and delivery to the State Treasury of the stamp duty) it should be noted that the regime of article 74 of the LGT does not exclude the principle of the inquisitorial power which consists in carrying out the necessary investigations to discover the truth, even if they are aimed at proving facts invoked by the interested parties (article 58 and paragraph a) of no. 1 of article 54 of the LGT).
It is verified that the AT does not even call into question the authenticity of the document issued by the depositary bank (article 374 of the Civil Code), whereby, as a private document, it has the probative force of no. 1 of article 376 of the Civil Code.
The argument raised that in the case of the binding information invoked by the Claimant, as a precedent in terms of recognition of the right to the exemption of paragraph e) of no. 1 of article 7 of the CIS, "additional elements" would have been requested, cannot fail to be seen as something that, in case of doubt about the proof presented by the Claimant in the context of the gracious complaint, should also have occurred, in the present case, within the legal period for deciding the procedure which is 4 months (no. 1 of article 57 of the LGT).
Furthermore, this Tribunal understands that the documentary evidence presented in the context of the gracious complaint, particularly issued by the lending bank (which is also the depositary of the Fund), is sufficient to meet the burden of proof that falls on the author of the gracious complaint, and that the tax payment slips for taxes withheld at source by banking entities discriminate the tax based on the items of the TGIS.
Finally, it is not clear what utility, in concrete terms, could be obtained from the attachment of the constitutive instruments of the bank debts themselves, duly identified in the gracious complaint and in the request for arbitral decision, with a view to ascertaining "the terms, alteration of terms and imputation of interest and commissions to the terms", since what is in question here will not, on the immediate plane, be the correct or incorrect assessment of the stamp duty in quantitative terms, a function which is assigned to the de jure taxpayer (and as such would be the first to be held responsible), in this case the lending banking entity under the terms of paragraphs b) and e) of article 2 of the CIS, but solely to ascertain the quantum of the tax that was actually borne by the de facto taxpayer (paragraph f) of no. 3 of article 3 of the CIS). And for this information it is not clear what other entity, apart from that provided by the lending bank which is also the depositary bank, could be more qualified and appropriate.
It should also be noted that the AT itself refers, as to the crucial aspect here in question, that is, whether Immovable Real Estate Investment Funds should be considered "financial institutions", the following: "indeed the Claimant is correct when it states that the AT has understood that immovable real estate investment funds are qualified as financial institution, under Community legislation, and as such would be exempt from stamp duty under paragraph n) (it would be intended to say paragraph e)) of no. 1 of article 7 of the CIS, regarding commissions charged when directly intended for the granting of credit in the context of the activity carried out by the credit institutions referred to there".
Naturally, if the AT refers that the Funds benefit from exemption in "commissions", by parity of reasoning they also benefit in interest and in the use of credit, which are taxable facts subject to stamp duty, expressed in the exemption rule.
In light of the foregoing, it does not appear that doubts exist that, in view of the evidence produced by the Claimant, regarding the stamp duty assessed and collected by the lending entity as de jure taxpayer, borne by the Fund here in question, in the context of the two loan contracts identified in point 4 of the facts proven, of item 17.3.1 of the TGIS, the same should not have been assessed and collected, since this interest benefited from the exemption prescribed in paragraph e) of no. 1 of article 7 of the CIS. It is an objective exemption that is applicable to the operations listed in the rule, occurring between "financial institutions".
In light of the foregoing, the request for arbitral decision must be granted in its entirety.
Right to Reimbursement of Improperly Paid Tax and Compensatory Interest
The Claimant formulates the request for reimbursement of the amount of € 86,639.09, relating to Stamp Duty paid, plus the corresponding compensatory interest.
Article 24, no. 1, paragraph b) of Decree-Law no. 10/2011, of 20 January (RJAT), provides that in the event of merit in the arbitral decision that the AT must: "(…)restore the situation that would exist if the tax act that is the subject of the arbitral decision had not been taken, adopting the necessary acts and operations for that purpose".
In the concrete case, following the illegality of the assessment acts, there is place for reimbursement of improperly paid tax, by force of articles 24, no. 1, paragraph b) of RJAT and 100 of the LGT, as this is essential to "restore the situation that would exist if the tax act that is the subject of the arbitral decision had not been taken".
Thus, the Claimant must be reimbursed for the tax it improperly bore.
The Claimant also formulated a request for condemnation of the AT to pay compensatory interest, therefore it is necessary to determine whether it is entitled to the same.
Article 43, no. 1 of the LGT provides that: "Compensatory interest is due when it is determined, in a gracious complaint or judicial challenge, that there was an error attributable to the services that resulted in payment of the tax debt in an amount greater than legally due".
In other words, there are three requirements for the right to such interest: i) the existence of an error in a tax assessment act attributable to the services; ii) the determination of such an error in a process of gracious complaint or judicial challenge; and iii) payment of a tax debt in an amount greater than legally due.
In this way, it is immediately possible to formulate a question: is it admissible to determine the payment of compensatory interest in tax arbitral proceedings? The answer will be affirmative.
Indeed, article 24, no. 5 of RJAT provides that: "Payment of interest, regardless of its nature, is due, according to the terms provided for in the General Tax Law and in the Code of Tax Procedure and Process".
Article 43, no. 1 of the LGT states that "compensatory interest is due when it is determined, in a gracious complaint or judicial challenge, that there was an error attributable to the services that resulted in payment of the tax debt in an amount greater than legally due"
In the present case, the error attributable to the AT's services occurred at the moment when, omitting the duty to decide on the gracious complaint, it allowed the presumption of dismissal by silence to form in the legal order, in a situation in which the assessment and payment of stamp duty was neither the responsibility of the Fund nor of its respective management company, but rather of the lending banking entity, de jure taxpayer, which made its assessment and delivery to the State Treasury, with its debit to the Fund, here the de facto taxpayer.
One cannot, therefore, speak of an error attributable to the taxpayer (the Fund and its management company) since no fact has been established that would allow us to conclude in that direction.
Reverting the interpretation referred to above to the present case, if the gracious complaint was filed on 20 August 2018 and the formation of the presumption of dismissal by silence occurred on 20 December 2018, compensatory interest is only due from 21 December 2018, because only on this date did the AT allow the silent act of dismissal of a claim that deserved to be granted to form.
There is thus place, following the declaration of illegality of the stamp duty assessment acts and also of the act of dismissal by silence of the gracious complaint, for the payment of compensatory interest, under the terms of the aforementioned provisions of articles 43, no. 1 of the LGT and 61, no. 5 of CPPT, calculated on the amount that the Claimant improperly paid (€ 86,639.09), at the rate of legal interest (articles 35, no. 10, and 43, no. 4, both of the LGT).
IV. DECISION
Wherefore, with the grounds set out:
The request for arbitral decision is judged to have merit, declaring non-conformity with the rule of paragraph e) of no. 1 of article 7 of the CIS, the act of dismissal by silence of the request for gracious complaint filed on 20 August 2018, which was presumed to occur on 20 December 2018, referred to in 6. of the facts proven and also the tax acts of Stamp Duty Assessment, carried out by C... and referred to in 4. of the facts proven, in the total amount of € 86,639.09;
The assessment and the decision of dismissal by silence of the gracious complaint are annulled.
The Respondent is condemned to reimburse to the Claimant the amount of € 86,639.09;
The request for payment to the Claimant of compensatory interest is judged to have merit, counted at the legal rate, with initial date from 21 December 2018 and until the date of processing of the respective credit note.
V - VALUE OF THE PROCEEDINGS
The value of the proceedings is fixed at 86,639.09 €, under the terms of article 97-A of the Code of Tax Procedure and Process (CPPT), applicable by force of the provisions of article 29, no. 1, paragraph a) of RJAT and of article 3, no. 2 of the Regulation on Costs in Tax Arbitration Proceedings (RCPAT).
VI – COSTS
Costs to be borne by the Respondent, in the amount of 2,754.00 €, as per article 22, no. 4 of RJAT and Table I attached to RCPAT.
Notify.
Lisbon, 05 July 2019
Collective Arbitral Tribunal,
_______________________________________
José Poças Falcão
(President)
Augusto Vieira
(Member)
__________________________________________
Arlindo José Francisco
(Member)
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