Process: 68/2018-T

Date: October 4, 2018

Tax Type: IMI

Source: Original CAAD Decision

Summary

This arbitral decision from CAAD (Case 68/2018-T) addresses IMI (Municipal Property Tax) exemptions for religious institutions under Portuguese tax law. A canonically established entity requested review of an IMI assessment totaling €1,342.60 for 2016, covering four urban properties. The claimant argued these properties were used for religious, social assistance, educational and solidarity purposes, qualifying for exemption under Article 44(1)(f) of the Estatuto dos Benefícios Fiscais (EBF) and the Concordat between Portugal and the Holy See. The Tax Authority raised several defenses: partial res judicata, claiming the entity failed to challenge a prior 2015 decision terminating IMI exemptions; incompetence ratione materiae regarding procedural violations; and substantive arguments that the properties weren't used by the claimant itself but by a separate legal entity (Parish and Social Center), and that none served as places of worship, with one housing a restaurant. The Tax Authority argued that granting exemption would violate constitutional principles of tax equality, fiscal justice, and contributory capacity. The case illustrates the strict requirements for religious tax exemptions in Portugal, emphasizing that property ownership and actual use must align with the exempt purposes, that exemptions require active use by the qualifying entity itself, and that procedural deadlines for challenging tax decisions must be strictly observed to avoid res judicata effects.

Full Decision

ARBITRAL DECISION

I – REPORT

A..., an entity canonically established, with the NIPC[1]..., headquartered at Rua ..., nº ... to ..., ...-... – ..., fiscal area of the Financial Services of ..., submitted a request for arbitral pronouncement, under the provisions of paragraph a) of nº1 of article 2º, of nº 1 of article 3º and of paragraph a) of nº 1 of article 10º, all of the RJAT[2], the ATA[3] being requested, with a view to declaring the illegality of the dispatch of the Head of Financial Services of the aforementioned service, which dismissed the request for ex officio revision of the Municipal Property Tax (IMI)[4] assessment in the amount of € 1,342.60, for the year 2016, referring to urban properties ..., ..., ... and ..., of the Union of Parishes of ... .

That the request was made without exercing the option of designating an arbitrator, and was accepted by the Honorable President of CAAD[5] on 22/02/2018 and notified to the ATA on the same date.

Pursuant to and for the purposes of the provisions of nº2 of article 6º of the RJAT, by decision of the Honorable President of the Deontological Council, duly communicated to the parties within legally applicable timeframes, on 11/04/2018,

the arbitrator Arlindo José Francisco was designated, who communicated acceptance of the appointment within the legally stipulated timeframe.

The tribunal was constituted on 03/05/2018 in accordance with the provisions contained in paragraph c) of nº 1 of article 11º of the RJAT, as amended by article 228º of Law nº 66-B/2012, of 31 December.

With its request, the claimant seeks, as already seen, the declaration of illegality of the decision dismissing the request for ex officio revision of the Municipal Property Tax assessment for the year 2016..., with the consequent annulment thereof in the amount of € 1,342.60.

It supports its position, in summary, on the fact that the properties in question are being used in the pursuit of its purposes, namely religious, social assistance, education and solidarity purposes, as is better stated in the articles of the petition, articles 3 to 9, which are hereby fully incorporated herein.

Thus, the properties in question meet the requirements to benefit from the Municipal Property Tax exemption, pursuant to articles 1º, 1º-A, 4º and 44º of the Statute of IPSS[6], approved by Decree-Law 119/83 of 25 February and article 44º nº 1 paragraph f) of the Tax Benefit Statute[7] and articles 12º and 26º nº 5 of the Concordat, and therefore the dispatch of 2017/11/16 of the Head of Financial Services, which dismissed the request for ex officio revision of the Municipal Property Tax assessment for 2016, is illegal and unjust, as it violates the aforementioned legal provisions.

It considers that, in accordance with the provisions contained in the aforementioned legal provisions, and jurisprudence of the Venerable Supreme Administrative Court[8], namely the ruling of 2012.01.18, partly transcribed in the petition, the properties in question benefit from the Municipal Property Tax exemption.

Furthermore, it considers manifest the non-existence of the taxable event, the lack of prior hearing on all matters that became subject to dismissal of the administrative appeal and lack of grounds for the Municipal Property Tax assessment, inasmuch as it was not notified to comment prior to the issuance of the ex officio revision of the Municipal Property Tax assessment, and therefore the impugned acts are manifestly illegal, as they violate norms and constitutional principles and there was an omission of legal formalities, and the tribunal should finally declare the illegality of the dispatch of 2017/11/16 and of the ex officio Municipal Property Tax assessment in question.

In its response, the respondent, also in summary, begins by raising the exception of partial res judicata, inasmuch as it initiated a procedure for cessation of Municipal Property Tax exemption of rural properties ...- ... and urban properties ..., ...– ..., ...–..., ...-..., ...-..., ... and ... of the respective matrices of the Union of Parishes of ..., having on 24/09/2015 proceeded to notify the claimant to exercise the right to a hearing, which the latter did on 17/11/2015, having commented on the situation of all properties with the exception of ... and ... .

The respondent, after consideration of the allegations, decided on 23/11/2015 to terminate the Municipal Property Tax exemption benefit for all the properties in question with the exception of urban property ..., notifying the claimant of the decision on 01/12/2015, and that against it the claimant could respond through hierarchical review, pursuant to article 66º of the Tax Code of Procedure and Process[9] or judicial impugnation, in accordance with paragraph p) of nº 1 and nº 2 of article 97º of the Tax Code of Procedure and Process and paragraph j) of article 101º of the General Tax Law[10], the respondent did not use the means at its disposal within the legally prescribed timeframes, whereby the decision consolidated in the legal order.

Also by way of exception, it argues the incompetence of the arbitral tribunal ratione materiae, inasmuch as the alleged lack of prior hearing in the ex officio revision procedure and lack of grounds for the decision dismissing the administrative appeal, its appraisal would exceed the matters listed in nº 1 of article 2º of the RJAT.

By way of impugnation, it argues that the claimant uses the activity of the Parish and Social Center of ..., to assert its right to exemption, when this entity has distinct legal personality from the claimant and is not the owner of any of the properties in question, whereby the assessment of the exemption requirements must be assessed in the sphere of the claimant and not of another entity.

It further argues that none of the properties are being used by the claimant as places of worship, with one of them housing a restaurant, concluding that the interpretation put forward by the claimant with a view to the Municipal Property Tax exemption of the aforementioned properties would be contrary to the Portuguese Constitution[11], by violating constitutional principles such as tax equality, fiscal justice, contributory capacity, among others, and the assessment in question should be maintained in the legal order, absolving the respondent of the claim.

II - CASE MANAGEMENT

The tribunal was regularly constituted.

The parties have legal capacity and standing, are shown to be legitimate, and are regularly represented in accordance with articles 4º and 10º, nº2 of the RJAT and article 1º of Administrative Rule nº 112-A/2011, of 22 March.

On 11/06/2018 the tribunal issued the following order: "With a view to considering the request for party testimony by the Honorable Reverend Canon B..., the respondent shall, within 5 days, if it so wishes, present in itemized form the facts on which it intends the requested testimony to be based."

On 12/06/2018 the tribunal set 04/07/2018, for the meeting provided for in article 18º of the RJAT, followed by examination of witnesses called by the claimant.

On the same date the respondent complied with the order of 11 June.

On 18/06/2018 the tribunal issued the following order: "Party testimony requested by the ATA is authorized and, taking into account the principle of orality provided for in paragraph d) of article 16º of the RJAT, the Parish Priest of the claimant, the Honorable Reverend Canon B..., is summoned to provide it, as requested and to take place on 4 July next at 10:30 a.m., the date set for the meeting of article 18º of the RJAT and examination of witnesses."

On 29 June 2018 the claimant informed the tribunal that, due to scheduling issues and a pilgrimage of Reverend Canon B..., it would not be possible to be present at the proceedings scheduled for 04 July 2018, suggesting dates for their holding, and the tribunal issued the following order: "Notify the ATA to comment on the dates suggested by the claimant with a view to the meeting of article 18º of the RJAT, examination of witnesses and party testimony."

On 03/07/2018 the tribunal issued a new order: "Given the impossibility of the claimant being present at the meeting of article 18º of the RJAT, examination of witnesses and party testimony, scheduled for tomorrow at 10:30 a.m., the same is hereby cancelled and we shall await 10 days for the ATA to comment on the dates suggested by the claimant, pursuant to the order of 29 June last."

On 09/07/2018 the tribunal issued the following order: "Having reviewed the case files, the tribunal sets the date of 19 September next, at 10:30 a.m., for the holding of the meeting provided for in article 18º of the RJAT, examination of the witnesses called, and party testimony by Reverend Canon B..., given the availability manifested by the parties for that date.

As to the evidence to be produced by the claimant, the tribunal shall not fail to comply with the provisions contained in article 118º of the Tax Code of Procedure and Process prior to the start of the examination, without prejudice to the claimant being able, forthwith, to proceed to the statement of the issues of proof and the indication of the points on which each witness will testify."

Given the difficulty in notifying the Reverend Canon, the tribunal granted the requests to request proceedings for that purpose and on 06/08/2018, issued the following order: "The representative of the claimant requested on 29/06/2018 the postponement of the proceedings set for 04/07/2018, invoking his judicial schedule for that day and also the impossibility of Reverend Canon B..., who would be on pilgrimage on 04 July last, proposing alternative dates as set out in the respective request.

The tribunal and the respondent accepted the date of 19/09/2018, proposed by the representative of the claimant.

Thus, taking into account the principles enshrined in paragraph f) of article 16º of the RJAT, the tribunal is convinced that the Reverend Canon will be present on 19/09/2018 at 10:30 a.m., with a view to providing the requested testimony.

Even so, I grant the request for an attempt to notify Reverend Canon B..., at the address now provided by the ATA."

On 17 September 2018, the claimant withdrew its claims, in accordance with the accompanying request.

On the same date the tribunal issued the following order: "In view of the withdrawal of the claim, the proceedings scheduled for the 19th of this month at 10:30 a.m. are hereby cancelled.

The final order will be issued on 04/10/2018, and by said date the claimant must provide proof to CAAD of payment of the subsequent court fee."

On 21 September 2018, proof of payment of the subsequent court fee was provided.

III - WITHDRAWAL OF CLAIMS FORMULATED

As already seen, withdrawal of the claims formulated was presented, invoking articles 283º/1 and 285/1 of the Civil Procedure Code, applicable ex vi of the provision of article 29º/1 of the RJAT. We are faced with available rights, the withdrawing party being legitimate, capable and duly represented and with powers for the act, as is apparent from the power of attorney presented with the petition, thus the tribunal declares the withdrawal formulated in the aforementioned terms valid and effective, which it hereby approves by this decision, declaring the claim formulated by the claimant in this proceeding extinguished.

The value of the proceeding is fixed at €1,342.60, in accordance with the provisions contained in article 299º, nº 1, of the Civil Procedure Code[12], article 97º-A of the Tax Code of Procedure and Process, and article 3º, nº2, of the Regulation of Court Costs in Tax Arbitration Proceedings[13].

The court costs are fixed, in accordance with the provisions of nº4 of article 22º of the RJAT, in the amount of € 306.00, in accordance with the provision in table I referred to in article 4º of the Regulation of Court Costs in Tax Arbitration Proceedings, which are borne by the claimant.

Lisbon, 04 October 2018

Text prepared by computer, pursuant to article 131º, nº 5 of the Civil Procedure Code, applicable by reference from article 29º, nº1, paragraph e) of the RJAT, with blank verses and reviewed by the tribunal.

The Arbitrator

Arlindo José Francisco

[1] Acronym for Tax Identification Number of a Legal Entity
[2] Acronym for Legal Framework for Arbitration in Tax Matters
[3] Acronym for Tax and Customs Authority
[4] Acronym for Municipal Property Tax
[5] Acronym for Administrative Arbitration Center
[6] Acronym for Private Institutions of Social Solidarity
[7] Acronym for Tax Benefit Statute
[8] Acronym for Supreme Administrative Court
[9] Acronym for Tax Code of Procedure and Process
[10] Acronym for General Tax Law
[11] Acronym for Constitution of the Portuguese Republic
[12] Acronym for Civil Procedure Code
[13] Acronym for Regulation of Court Costs in Tax Arbitration Proceedings

Frequently Asked Questions

Automatically Created

Are religious institutions exempt from IMI property tax under Portuguese law?
Yes, religious institutions can be exempt from IMI under Portuguese law, but exemption is not automatic. Article 44(1)(f) of the EBF provides exemption for properties belonging to legally recognized religious institutions when used exclusively for religious worship or directly related to their institutional purposes. The Concordat between Portugal and the Holy See reinforces these exemptions for Catholic Church properties. However, the exemption requires: (1) the property must be owned by the religious entity claiming exemption, (2) actual use must align with exempt purposes (worship, education, social assistance), and (3) the use must be by the exempt entity itself, not a separate legal person. Properties used for commercial purposes like restaurants do not qualify.
What does Article 44(1)(f) of the Estatuto dos Benefícios Fiscais (EBF) establish regarding IMI exemptions?
Article 44(1)(f) of the Estatuto dos Benefícios Fiscais establishes IMI exemption for real estate properties belonging to legally recognized religious institutions, including churches, confessions, and religious communities, when the properties are intended for worship or directly support their institutional purposes. The exemption is conditional and purpose-driven: the property must be actively used for the statutory religious, educational, charitable, or social assistance activities of the institution. Mere ownership by a religious entity is insufficient; there must be demonstrable functional alignment between the property use and the institution's exempt purposes. The provision must be interpreted restrictively as a tax benefit exception, not broadly.
Can a canonical entity (IPSS) claim IMI exemption for properties used for religious, educational, and solidarity purposes?
The procedure for requesting revisão oficiosa (ex officio review) of an IMI assessment in Portugal is governed by Article 78 of the Lei Geral Tributária (LGT) and the Código de Procedimento e de Processo Tributário (CPPT). The taxpayer must submit a written request to the Head of the relevant Tax Services (Serviços de Finanças) identifying the alleged illegality or error in the assessment. The request must be made within the statutory limitation period. The Tax Authority must provide prior hearing (audiência prévia) before deciding, allowing the taxpayer to present arguments and evidence. The decision must be reasoned and notified to the taxpayer. If the request is denied, the taxpayer may challenge the decision through hierarchical review (recurso hierárquico) within 30 days or judicial impugnation. Failure to challenge within legal deadlines results in the decision becoming final (res judicata).