Process: 683/2016-T

Date: May 17, 2017

Tax Type: IMT Selo

Source: Original CAAD Decision

Summary

This CAAD arbitral decision (Process 683/2016-T) addresses the constitutional validity of retroactive tax assessments on real estate investment funds for residential rental (FIIAH). The fund acquired property in 2013 with IMT and Stamp Tax exemptions under Law 64-A/2008. When selling the property in 2016, the Tax Authority demanded payment of €20,164.75 (IMT) and €3,120.00 (IS) based on Article 236 of Law 83-C/2013, which retroactively imposed conditions on previously granted exemptions. The applicant challenged these assessments as unconstitutional, arguing violation of Article 103(3) of the Portuguese Constitution prohibiting retroactive tax legislation. The core legal dispute concerns whether Article 236 constitutes impermissible retroactive taxation by imposing new conditions on exemptions already granted, or merely clarifies the original regime's application. Law 83-C/2013 added requirements that properties must be leased for permanent residence within three years to maintain exemptions, applying this standard to acquisitions made before the law's enactment. The Tax Authority defended the assessments, contending the provision simply applied the original FIIAH regime rather than creating retroactive obligations. The arbitral tribunal's jurisdiction derives from RJAT Article 2(1)(a), with a single arbitrator deciding based on written submissions. The applicant seeks annulment of both assessments, reimbursement of taxes paid, and compensatory interest. This case has significant implications for FIIAH and SIIAH funds, establishing whether transitional provisions can retroactively eliminate tax benefits for transactions completed under prior favorable regimes, and defining constitutional limits on legislative modifications to real estate investment fund taxation.

Full Decision

ARBITRAL DECISION

I. REPORT

  1. A…, S.A., with headquarters at …, no.…—…, …— … Lisbon, with the tax identification number…, in its capacity as managing company of the fund for real estate investment B…— CLOSED REAL ESTATE INVESTMENT FUND FOR RESIDENTIAL RENTAL, registered with the Securities Market Commission, with the tax identification number …, requested the constitution of the arbitral tribunal in tax matters with a view to the declaration of nullity or, should that not be deemed appropriate, the annulment of the assessments of Municipal Tax on Transfers of Real Estate (IMT) and Stamp Tax (IS) relating to the acquisition, for valuable consideration, of the autonomous fraction designated by the letters CH of the urban property situated at …, no.º…, …, …, registered in the respective property matrix of the parish of … and … under article U-… (corresponding to article … of the extinct parish of …).

The assessments in question, in the amounts of € 20,164.75 and € 3,120.00, relating to IMT and IS, respectively, were issued on 22-08-2016 following a request timely submitted by the Applicant on behalf of the taxpayer, having as legal basis the provision of no. 16 of article 8.° of the Regime of Real Estate Investment Funds for Residential Rental (FIIAH) approved by Law no. 64-A of 2008 of 31/12, applicable by virtue of article 236.º of Law 83-C/2013, of 31/12.

As a consequence of the declaration of illegality of the aforementioned acts, the Applicant requests that their annulment be determined with the consequent reimbursement of the amount paid, plus the respective compensatory interest calculated in accordance with the legal terms.

  1. As the basis for its request, the Applicant alleges, in summary, that the questioned assessments are vitiated by abstract illegality, inasmuch as they were issued based on a provision that is unconstitutional – article 236.º of Law no. 83-C/2013, of 31/12 (Transitional Provision within the Framework of the Special Regime Applicable to FIIAH and SIIAH) – by violation of the principle of non-retroactivity of tax law, enshrined in article 103.° (Tax system), number 3, of the Constitution of the Portuguese Republic (CRP).

  2. For its part, the Respondent – Tax and Customs Authority – AT, in response to the allegations, declares itself in favour of the dismissal of the request and, consequently, the maintenance of the questioned assessment acts, on the ground that the issue does not concern retroactivity of the law but merely the application of the special regime applicable to FIIAH and SIIAH, in its original formulation.

  3. The request for constitution of the arbitral tribunal, presented on 16-11-2016, was accepted by the President of CAAD and automatically notified to the Respondent, Tax and Customs Authority, on 02-12-2016.

  4. Pursuant to the provisions of paragraph a) of no. 2 of article 6.º and paragraph b) of no. 1 of article 11.º of Decree-Law no. 10/2011, of 20/01, as worded by article 228.º of Law no. 66-B/2012, of 31/12, the Deontological Council designated the undersigned as arbitrator of the single arbitral tribunal, who communicated acceptance of the appointment within the applicable period, and notified the parties of this appointment on 17-01-2017.

  5. Duly notified of this appointment, the parties did not express their will to challenge the designation of the arbitrator, in accordance with the combined provisions of article 11.º, no. 1, paragraphs a) and b) of RJAT and articles 6.º and 7.º of the Deontological Code.

  6. Thus, in conformity with the provision of paragraph c) of no. 1 of article 11.º of RJAT, as worded by article 228.º of Law no. 66-B/2012, of 31/12, the single arbitral tribunal was constituted on 01-02-2017.

  7. Duly constituted, the arbitral tribunal is materially competent, given the provision of articles 2.º, no. 1, paragraph a), of RJAT.

  8. The parties have legal personality and capacity and have standing (arts. 4.º and 10.º, no. 2, of RJAT, and art. 1.º of Portaria no. 112-A/2011, of 22/03).

  9. Given the knowledge derived from the procedural documents submitted by the parties, which is considered sufficient for the decision, the Tribunal decided to dispense with the meeting referred to in article 18.º of RJAT.

  10. The proceedings do not suffer from nullities and no other questions were raised that would prevent the examination of the merits of the case, with the conditions being met for a final decision to be rendered.

II. FACTS

  1. With relevance to the assessment of the question raised, the following factual elements stand out, which, on the basis of the elements included in this file, are considered to be proven:

12.1. The Fund "B…- Closed Real Estate Investment Fund for Residential Rental", represented by the Applicant, was, at the date of the assessments in question, the owner of the urban property situated at…, no.…, Block…, …, registered in the respective property matrix of the parish of … and … under article …-CH – previously article … of the extinct parish of….

12.2. The aforementioned property was acquired on 05-08-2013, and the acquisition benefited from exemption from IMT and IS under no. 7, paragraph a) and no. 8 of article 8.º of the legal regime of FIIAH, approved by Law no. 64-A/2008, of 31/12.

12.3. With a view to the alienation of the property in question, the assessment of IMT and IS relating to that acquisition was requested, in accordance with the provisions of no. 16 of article 8.º of the special regime applicable to FIIAH, approved by Law no. 64-A/2008, of 31/12, provision amended by Law no. 83-C/2013, of 31/12, combined with the transitional regime contained in article 236.º of this Law.

12.4. As requested, on 22-08-2016, the following assessments were issued (Doc. 1):

  • IMT, no.…, in the amount of € 20,164.75,

  • Stamp Tax (IS), no.…, in the amount of € 3,120.00.

12.5. The tax assessed in the aforementioned assessments was paid on 23-08-2016 (Doc. 2).

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

III. LEGAL MATTERS

III.i) Position of the Parties

a) Position of the Applicant

  1. As already previously mentioned, the question put to the Arbitral Tribunal is confined to the Applicant's claim regarding the assessment of the legality of the IMT and IS assessments, identified above, issued on the basis of an assessment request formulated under no. 16 of article 8.º of the Special Regime of FIIAH and no. 2 of article 236.º of Law no. 83-C/2013, of 31/12.

  2. In support of its claim, the Applicant, in summary, alleges that:

15.1. Law no. 64-A/2008, of 31/12 - Budget for the State for 2009 -, which approved the special regime applicable to real estate investment funds for residential rental (FIIAH) and real estate investment companies for residential rental (SIIAH) established in article 8.º the tax regime applicable to FIIAH with respect to the Municipal Tax on Transfers of Real Estate and defined in number 7 of the cited article 8.º that:

"The following are exempt from IMT:

a) The acquisitions of urban properties or autonomous fractions of urban properties intended exclusively for rental for permanent residence, by the investment funds referred to in no. 1;

b) The acquisitions of urban properties or autonomous fractions of urban properties intended for permanent residence, as a result of the exercise of the purchase option referred to in no. 3 of article 5.º by the tenants of the properties that form part of the assets of the investment funds referred to in no. 1."

15.2. Law no. 83-C/2013, of 31/12 - Budget for the State for 2014 - added to article 8.º of the Tax Regime of FIIAH numbers 14 to 16, with the following text:

«14 - For purposes of the provisions of nos. 6 to 8, it is considered that urban properties are intended for rental for permanent residence whenever they are subject to a lease contract for permanent residence within three years from the moment they became part of the fund's assets, with the taxpayer being required to communicate and provide proof to the AT of the respective actual lease, within 30 days following the end of the said period.

15 - When the properties have not been subject to a lease contract within the three-year period provided for in the previous number, the exemptions provided for in nos. 6 to 8 shall cease to have effect, in which case the taxpayer must request from the AT, within 30 days following the end of the said period, the assessment of the respective tax.

16 - Should the properties be alienated, except in the cases provided for in article 5.º, or should the FIIAH be subject to liquidation, before the period provided for in no. 14 has elapsed, the taxpayer must likewise request from the AT, before the alienation of the property or the liquidation of the FIIAH, the assessment of the tax due in accordance with the previous number.»

15.3. Law no. 83-C/2013, of 31/12, also established in its article 236.º the following transitional regime:

«1 - The provisions of nos. 14 to 16 of article 8.º of the special regime applicable to FIIAH and SIIAH, approved by articles 102.º to 104.º of Law no. 64-A/2008, of 31 December, are applicable to properties that have been acquired by FIIAH from 1 January 2014.

2 - Without prejudice to the provision in the previous number, the provisions of nos. 14 to 16 of article 8.º of the special regime applicable to FIIAH and SIIAH, approved by articles 102.º to 104.º of Law no. 64-A/2008, of 31 December, are equally applicable to properties that have been acquired by FIIAH before 1 January 2014, with the three-year period provided for in no. 14 being counted, in those cases, from 1 January 2014.»

15.4. Based exclusively on the provisions cited above, in particular, those resulting from the changes made to the Tax Regime of FIIAH, the now Applicant requested from the Tax and Customs Authority (AT) the assessment of IMT and IS that are the subject of this request for arbitral pronouncement.

15.5. The questioned assessments relate to an urban property which, at the date of entry into force of Law no. 83-C/2013, of 31/12, formed part of the assets of the Real Estate Investment Fund B…— Closed Real Estate Investment Fund for Residential Rental.

15.6. Considering the nature of taxes of single obligation both of IMT and IS, and that the tax event, located in time, is exhausted in the act of acquisition of the property, the Applicant argues that the fact that exemption from the said taxes was recognized to it when the said acquisition took place constitutes a vested right crystallized in its legal sphere at the date on which the amendments to the Special Regime of FIIAH occurred.

15.7. Moreover, in the Applicant's view, in accordance with the regime in force at the date of acquisition, the said exemptions were not subject to a resolutive condition, being manifest that "Not being, however, legally provided for, at the moment of recognition of the exemption, any facts or circumstances on which depended the lapse of the recognized exemption, it is manifest that the subsequent imposition of such facts or circumstances to exemptions crystallized in the tax legal order of the Applicant suffers from unconstitutionality by violation of the principle of non-retroactivity of tax law, enshrined in article 103.º (Tax system), no. 3, of the Constitution of the Portuguese Republic."

15.8. For which reason, concludes the Applicant, " Article 236.º (Transitional provision within the framework of the special regime applicable to FIIAH and SIIAH) of Law no. 83-C/2013, of 31 December (Budget for the State for 2014), by extending the application of the current Tax Regime of FIIAH ("to properties that have been acquired by FIIAH before 1 January 2014, with the three-year period provided for in no. 14 being counted, in those cases, from 1 January 2014") is directly and unequivocally violating the principle of non-retroactivity of tax law constitutionally enshrined. Indeed, the extension established therein constitutes a new regime for the lapse of the exemptions provided for in numbers 7, paragraph a) and 8 of article 8.º (Tax Regime) and not merely a densification of a criterion previously provided for."

15.9. In reinforcement of the position it asserts, the Applicant attaches to the file a legal opinion.

b) Position of the Respondent
  1. After exposing in detail the tax regime applicable to FIIAH, the Respondent, referring to the case in question, emphasizes that:

16.1. At the date of creation of the said tax regime, established by Law no. 64-A/2008, of 31/12, the exemptions in question, both in the context of IMT and in the context of Stamp Tax (IS), respectively required:

(i) that the acquisition of the properties had as exclusive purpose the "rental for permanent residence" and,

(ii) that the transfer had as its object "properties intended for permanent residence occurring as a result of the conversion of the right of ownership of those properties into a right of lease over the same, as well as with the exercise of the purchase option provided for in no. 3 of article 5".

16.2. The taxpayers who wished to benefit from the said exemptions have always had, since the beginning of the tax regime applicable to FIIAH, to meet the requirement that such properties be intended exclusively for rental for permanent residence.

16.3. For which reason, the Applicant's argument lacks merit when it states that the exemptions in question were not conditioned by any facts or circumstances, and, consequently, the argument that it constructs proceeding from such incorrect premise is equally vitiated by error.

16.4. The new wording introduced by Law no. 83-C/2013, of 31/12, in favor of legal certainty and the principle of protection of legitimate expectations, and in keeping with the spirit of the legislator when creating the regime, merely came to densify the criterion already required, stipulating "that urban properties are intended for rental for permanent residence whenever they are subject to a lease contract for permanent residence within three years from the moment they became part of the fund's assets".

16.5. On the other hand, the Respondent argues, "it must be noted that the cessation of a tax benefit can always take place, for example, if it is found, in a concrete case, through inspection, that the respective requirements are not met.

Indeed, pursuant to article 7.º, no. 1, of the Tax Benefits Statute (EBF): "All persons, natural or legal, of public or private law, to whom tax benefits are granted, automatic or subject to recognition, are subject to inspection by the Tax and Customs Authority, the Regional Directorate of Tax Matters and other competent entities, for control of the verification of the requirements of the respective tax benefits and of compliance with the obligations imposed on holders of the right to benefits".

It being that, as follows from article 14.º, no. 1, of the EBF, "the termination of tax benefits has the consequence of automatic restoration of standard taxation". To which is added, moreover, the provision of article 14.º, no. 2, of the EBF in which it is determined that "when the tax benefit relates to the acquisition of goods intended for the direct realization of the purposes of the acquirers, it ceases to have effect if they are alienated or given another purpose without authorization from the Minister of Finance, without prejudice to other sanctions or different regimes established by law".

16.6. For which reason, concludes the Respondent, "... it is manifest that, since the beginning of the regime, the tax benefits in question applicable to FIIAH have always depended on the dedication of the properties to rental for permanent residence, a legal requirement that the AT, within the scope of its inspection powers, could always assess, in order to conclude for the maintenance of the benefit or, rather, for the restoration of the standard taxation system.

Thus, given that the properties are alienated without dedication of the same to rental for permanent residence, this would always determine the lapse of the exemption, under article 14.º, no. 2, of the EBF, and article 8.º, no. 16 of the regime merely came to implement an anti-abuse measure, establishing that the properties that are not kept in portfolio with exclusive dedication to residential rental were not acquired for such purpose.

ON THE MERITS OF THE CLAIM

  1. From the facts given as proven and from the positions of the parties summarized above, it follows that the essential issue is whether the IMT and IS assessments challenged are vitiated by illegality, because issued under the provisions of no. 16 of article 8.º of the Special Regime of FIIAH and no. 2 of article 236.º of Law no. 83-C/2013, of 31/12, which the Applicant considers to be unconstitutional by violation of the provisions of article 103.º of the CRP.

  2. It is important, therefore, to emphasize that the Special Regime Applicable to FIIAH and SIIAH, approved by Law no. 64-A/2008, of 31/12, provides, in no. 7 of article 8.º, that the following are exempt from IMT "acquisitions of urban properties or autonomous fractions of urban properties intended exclusively for rental for permanent residence" by the said Investment Funds, as well as "acquisitions of urban properties or autonomous fractions of urban properties intended for permanent residence, as a result of the exercise of the purchase option referred to in no. 3 of article 5.º by the tenants of the properties that form part of the assets of the investment funds referred to in no. 1."

  3. According to no. 8 of the same article, the following benefit from exemption from IS "all acts performed, as long as they are connected with the transfer of urban properties intended for permanent residence occurring as a result of the conversion of the right of ownership of those properties into a right of lease over the same, as well as with the exercise of the purchase option provided for in no. 3 of article 5.º".

  4. Through Law no. 83-C/2013, of 31/12, the wording of said article 8.º was amended, with numbers 14 to 16 being added to it, with the following content:

"14 - For purposes of the provisions of nos. 6 to 8 of said art. 8.º, it is considered that "urban properties are intended for rental for permanent residence whenever they are subject to a lease contract for permanent residence within three years from the moment they became part of the fund's assets, with the taxpayer being required to communicate and provide proof to the AT of the respective actual lease, within 30 days following the end of the said period.

15 - When the properties have not been subject to a lease contract within the three-year period provided for in the previous number, the exemptions provided for in nos. 6 to 8 shall cease to have effect, in which case the taxpayer must request from the AT, within 30 days following the end of the said period, the assessment of the respective tax.

16 - Should the properties be alienated, except in the cases provided for in article 5.º, or should the FIIAH be subject to liquidation, before the period provided for in no. 14 has elapsed, the taxpayer must likewise request from the AT, before the alienation of the property or the liquidation of the FIIAH, the assessment of the tax due in accordance with the previous number".

  1. Article 236.º of the same Law further established the following transitional provision:

"1 - The provisions of nos. 14 to 16 of article 8.º of the special regime applicable to FIIAH and SIIAH, approved by articles 102.º to 104.º of Law no. 64-A/2008, of 31 December, are applicable to properties that have been acquired by FIIAH from 1 January 2014.

2 - Without prejudice to the provision in the previous number, the provisions of nos. 14 to 16 of article 8.º of the special regime applicable to FIIAH and SIIAH, approved by articles 102.º to 104.º of Law no. 64-A/2008, of 31 December, are equally applicable to properties that have been acquired by FIIAH before 1 January 2014, with the three-year period provided for in no. 14 being counted, in those cases, from 1 January 2014".

  1. It is therefore, essentially, the content of the cited provisions, under which the questioned assessments were requested and issued, that forms the basis for the request for declaration of illegality of the same, on the basis of violation of the constitutional principle of non-retroactivity of tax law.

  2. This matter has been the subject of numerous decisions of the Arbitral Tribunal rendered in situations entirely identical to that of the present case, highlighting, among others that point in the same direction [i], the conclusions formulated in Proc. no. 689/2015-T:

" ... the obligation to dedicate the property to residential rental is not a requirement of the amendments introduced by articles 235.º and 236.º of 83-C/2013, of 31 December, but rather a requirement of the tax regime of FIIAH. It is the natural consequence, as the Respondent rightly alleges, of the motivations that led to the creation of a temporary special regime applicable to these Funds, linked to the economic crisis and the consequent increased difficulty for individuals and families in paying installments on loan contracts concluded for the acquisition of permanent residence property, the regime therefore seeking to address situations of difficulty and encourage rental for permanent residence.

The 2014 State Budget certainly comes to establish new rules for the exemption: if the dedication to rental for permanent residence does not occur within the 3-year period after the property enters the Fund and, further if the FIIAH is subject to liquidation, before that period has elapsed, the acquirer must request the assessment of the IMT that was not assessed.

This was not, however, the reason why the Applicant proceeded with the declarations that gave rise to the assessments in question, which is clearly apparent from the analysis of the documents attached, notwithstanding the argument of the Applicant resulting in something different.

The IMT assessments issued with respect to the properties described above were not based on their retention in the fund for a period equal to or greater than 3 years without dedication to rental for permanent residence.

The assessments in question, moreover, as follows from the notes on assessment attached to the file, were based on the fact, in the words of the Applicant itself, of being given to the properties "a purpose different from that on which the benefit was based", "the exemption lapsing".

The fact that the alienation of the property lapses the exemption is not, as will be explained below, a new fact, resulting from the addition made by the 2014 State Budget. New will be, if anything, the obligation for the acquirer to request the assessment of the taxes that were not assessed before the alienation. A provision which is not only merely procedural, but is not even in question in this case, given that it was precisely this that the Applicant did and the consequence would always be, as we shall see results from the Tax Benefits Statute, that the taxes would be assessed ex officio by the Treasury (plus interest and penalties provided for by law), once the alienation was established.

It seems to us, therefore, evident that the question sub judice is not connected with the possible unconstitutionality, by violation of the prohibition of retroactivity of tax law, of the numbers added to article 8.º by the 2014 State Budgets.

In fact, the alienation of the property in question by the Applicant determines, as it itself recognized in the declarations for assessment of IMT and IS, the lapse of the exemption, because it was given by it a purpose different from that which had determined the granting of the benefit.

For compliance with paragraph a) of no. 7 of article 8.º it is not sufficient a declared intention at the acquisition of the property, but an effective dedication to rental for permanent residence.

It is not therefore true, as the Applicant states, that facts or circumstances on which depended the respective lapse were not already legally provided for, at the moment of recognition of the exemption, at least as far as the circumstances that actually occurred: the alienation of the property.

In truth, the granting of a benefit already depended – and always depends – on the effective verification of the respective requirements, in accordance with article 12º of the EBF (article 11.º, in the wording of the EBF that was in force prior to the republication thereof by Decree-Law no. 108/2008, of 26/06).

The fact that the Applicant proceeded to alienate the property which, upon acquiring, it declared it would dedicate in order to permit it to be recognized – as it was – the exemption from IMT and IS, would always determine, even if the added number 16 did not expressly provide for it, the lapse of such exemptions, by virtue of the provisions of article 12.º and no. 3 of article 14.º of the Tax Benefits Statute (former 12.º, no. 3, in the wording of the EBF that was in force prior to the republication thereof by Decree-Law no. 108/2008, of 26/06), according to which "When the tax benefit relates to the acquisition of goods intended for the direct realization of the purposes of the acquirers, it ceases to have effect if they are alienated or given another purpose without authorization from the Minister of Finance, without prejudice to other sanctions or different regimes established by law.".

The Applicant neither alleged nor, for that matter, demonstrated having obtained the authorization provided therein, or any other circumstance that would prevent the granted exemptions from ceasing to have effect as a consequence of the alienation.

It is for this reason that, as we have already stated above, we consider that the question of the alleged unconstitutionality of the provisions added does not arise in the case in question, to the extent that, as regards the alienation of the property, no. 16 of article 8.º of the Legal Regime of FIIAH merely reiterates what already resulted from the Tax Benefits Statute.

Which, moreover, is well understood, having regard to the ratio of the granting of tax benefits.

The ratio for granting the tax benefit in the context of IMT and IS to FIIAH is, clearly, their dedication to rental for permanent residence— "The acquisitions of urban properties or autonomous fractions of urban properties intended exclusively for rental for permanent residence, by the investment funds..." – for which reason the consequence of giving it a different purpose is that the exemption could not have been granted, it being necessary to restore legality, by assessing the taxes which, but for the declaration of intention made at the time of acquisition, would have had to be assessed.

Which the Applicant recognized, all the more so in that it is precisely this that appears in the declarations made by the Applicant itself for the assessment of IMT and IS.

Concluding, the alienation of the property would always determine the lapse of the exemption by application of the provisions of no. 3 of article 14.º of the EBF, there being therefore no question, in the situation sub judice, of any retroactive application of a provision that comes to introduce a new regime for the lapse of exemptions, nor is there any harm to the expectations of the Applicant or aggravation of its tax position, for which reason we thus consider that the assessments of IMT and Stamp Tax in question are lawful.

The examination of the question raised by the Applicant regarding the alleged retroactivity of the regime provided for in article 236º of the Budget Law for 2014 is thus rendered moot to the extent that, as demonstrated above, the conditions that gave rise to the tax assessments in question have nothing to do with the amendments resulting from said article, relating solely to the alienation of the property and consequent dedication to purposes different from those for which the exemptions from IMT and Stamp Tax were granted.

  1. Adhering, without reservation, to the conclusions and reasoning expressed in the Arbitral Decision transcribed above, it is therefore considered that the request for arbitral pronouncement is unfounded, deciding that the assessments that are its subject are lawful.

  2. Having decided that the challenged assessments are lawful, the examination of the request for condemnation to compensatory interest is rendered moot.

IV. DECISION

On these grounds, and with the reasoning set out, the Arbitral Tribunal decides:

a) To dismiss the request for annulment of the IMT and IS assessments that are the subject of this case;

b) To condemn the Applicant to pay the costs of the proceedings.

Value of the case: € 23,284.75

Costs: Pursuant to article 22.º, no. 4, of RJAT, and in accordance with Table I attached to the Regulation on Costs in Tax Arbitration Proceedings, I set the amount of costs at € 1,224.00, to be borne by the Applicant.

Lisbon, 17 May 2017

The Arbitrator, Álvaro Caneira.

[i] See, among others, the Arbitral Decisions rendered in Procs. 398/2015-T, 684/2015-T, 688/2015-T, 689/2015-T, 690/2015-T, 691/2015-T, 694/2015-T, 705/2015-T, 706/2015-T, 707/2015-T, 708/2015-T, 709/2015-T, 710/2015-T, 717/2015-T, 729/2015-T, 735/2015-T, 737/2015-T, 56/2016-T, 57/2016-T, 61/2016-T, 63/2016-T, 125/2016-T, 128/2016-T, 165/2016-T, 419/2016-T and 615/2016-T.

Frequently Asked Questions

Automatically Created

What is the special IMT and Stamp Tax exemption regime for FIIAH housing rental investment funds in Portugal?
The special regime for FIIAH funds under Law 64-A/2008 provided exemptions from IMT (Municipal Property Transfer Tax) and IS (Stamp Tax) on acquisitions of urban properties or autonomous fractions intended exclusively for rental as permanent residences. The exemptions applied to property acquisitions by FIIAH funds and to tenant purchases exercising purchase options. This favorable tax treatment aimed to incentivize residential rental investment and increase housing availability. However, Law 83-C/2013 modified this regime by adding conditions requiring properties to be leased for permanent residence within three years of acquisition to maintain the exemptions.
Can Article 236 of Law 83-C/2013 be challenged as unconstitutional retroactive tax legislation under Article 103(3) of the Portuguese Constitution?
Yes, Article 236 of Law 83-C/2013 can be challenged as unconstitutional retroactive taxation. The applicant argues it violates Article 103(3) of the Portuguese Constitution, which prohibits retroactive tax laws. The provision applies new conditions to exemptions already granted for acquisitions completed under the prior regime, requiring payment of taxes originally exempted when properties are sold before meeting newly imposed requirements. The constitutional challenge hinges on whether this constitutes impermissible authentic retroactivity (applying new tax burdens to completed past transactions) or permissible retrospectivity (applying new rules to future consequences of past acts). The Tax Authority counters that Article 236 merely applies the original FIIAH regime, not retroactive law.
How does the CAAD arbitral tribunal handle disputes over IMT and Stamp Tax liquidations on property acquisitions by FIIAH funds?
The CAAD arbitral tribunal handles FIIAH-related IMT and Stamp Tax disputes through a structured process. The fund's management company files an arbitration request challenging the assessments' legality. The CAAD President accepts the request and notifies the Tax Authority. The Deontological Council appoints a single arbitrator with expertise in tax law. Parties may challenge the appointment but cannot on substantive grounds. The tribunal verifies its material jurisdiction under RJAT Article 2(1)(a), confirms parties' legal standing, and may dispense with oral hearings if written submissions provide sufficient basis for decision. The arbitrator examines whether assessments comply with applicable law, including constitutional requirements, and issues a binding decision on nullity or annulment claims.
Are FIIAH funds entitled to reimbursement and compensatory interest when IMT and Stamp Tax assessments are annulled?
Yes, FIIAH funds are entitled to reimbursement and compensatory interest when IMT and Stamp Tax assessments are annulled. Upon declaring assessments illegal and ordering their annulment, the tribunal must order reimbursement of taxes paid. Portuguese tax law provides for compensatory interest on improperly collected taxes, calculated from payment date until reimbursement, compensating taxpayers for the State's use of funds to which it was not entitled. The interest rate and calculation method follow statutory provisions in the General Tax Law (LGT). This ensures taxpayers are made whole when administrative acts are declared illegal, providing not just principal reimbursement but also time-value compensation for the period the State wrongfully retained funds.
What was the transitional regime under Law 83-C/2013 that removed tax benefits previously granted to FIIAH and SIIAH funds?
The transitional regime under Article 236 of Law 83-C/2013 retroactively modified tax benefits for FIIAH and SIIAH funds. While Law 64-A/2008 granted immediate IMT and IS exemptions upon property acquisition, Law 83-C/2013 added numbers 14-16 to Article 8, conditioning exemptions on properties being leased for permanent residence within three years of acquisition. Article 236 applied these new requirements to properties acquired before the law's enactment, mandating that funds pay previously exempted IMT and IS when selling properties that did not meet the three-year rental condition. This transitional provision effectively removed tax benefits granted under the earlier regime, creating liability for taxes originally exempted, which forms the basis for constitutional challenges based on prohibited retroactive taxation.