Process: 684/2015-T

Date: June 7, 2016

Tax Type: IMT Selo

Source: Original CAAD Decision

Summary

This CAAD arbitral decision (Process 684/2015-T) addresses a constitutional challenge to Article 236 of Law 83-C/2013, concerning IMT (Property Transfer Tax) and Stamp Tax exemptions for FIIAH (Real Estate Investment Funds for Affordable Housing). The applicant, managing a real estate investment fund that acquired properties before January 1, 2014, challenged tax assessments issued after the transitional provision retroactively applied new expiration rules to previously granted exemptions. The core legal issue centers on whether Article 236 violates the constitutional principle of non-retroactivity of tax law enshrined in Article 103(3) of the Portuguese Constitution. The applicant argued that IMT and Stamp Tax exemptions under Article 8(7)(a) and 8(8) of the FIIAH regime were definitively crystallized upon property acquisition and recognition of the exemptions, without any conditions or expiration mechanisms at that time. Article 236's transitional rule imposed a new 3-year expiration period on these already-granted exemptions, counting from January 1, 2014, rather than the original acquisition date. The applicant contended this constituted impermissible retroactive taxation, as it modified the legal effects of completed tax facts. The fund sought declaration of nullity (or alternatively voidability) of the assessments, arguing that violation of a fundamental constitutional right results in nullity rather than mere voidability. The Tax Authority contested jurisdiction and merit. This case exemplifies the tension between legislative fiscal policy changes and constitutional protections against retroactive tax laws, particularly regarding transitional provisions affecting investment funds that relied on previously established tax exemption regimes for structuring real estate acquisitions.

Full Decision

ARBITRAL DECISION

I – Report

1.1. A…, S.A., with registered office at Avenida…, no. … –…, …-… Lisbon, and with TIN … (hereinafter referred to as "Applicant") – in its capacity as managing company of the real estate investment fund "B…– Closed Real Estate Investment Fund for Housing Rental" ("Fund B…") –, in face of the IMT assessment no. … and IS assessment no.…, presented, on 18/11/2015, a request for the constitution of an arbitral tribunal and for an arbitral pronouncement, pursuant to the provisions of article 2, no. 1, let. a), of Decree-Law no. 10/2011, of 20/1 (Legal Framework for Arbitration in Tax Matters, hereinafter only designated as "LFATM"), in which the Tax and Customs Authority (TA) is requested, seeking that it be "declared the nullity [or, should it not be understood as such, the voidability] of [the above-mentioned] assessments, based on the [...] unconstitutionality" of "article 236 (Transitional Norm within the Scope of the Special Regime Applicable to FIIAH and SIIAH) provided by Law no. 83-C/2013, of 31 December – to the extent that it determines the application of the current Tax Regime of the FIIAH 'to the real estate properties that have been acquired by FIIAH before 1 January 2014, in which cases the three-year period provided in no. 14 shall be counted from 1 January 2014' – constitutes a new regime of expiration of the exemptions provided in no. 7, letter a) and no. 8 of article 8 (Tax Regime) of the Tax Regime of FIIAH, revealing a flagrant and unequivocal violation of the principle of non-retroactivity of tax law, embodied in article 103 (Tax System), number 3, of the Constitution of the Portuguese Republic".

1.2. On 22/1/2016 the present Singular Arbitral Tribunal was constituted.

1.3. Pursuant to art. 17, no. 1, of the LFATM, the TA was notified, as the defendant party, to present its reply, pursuant to the said article. The TA presented its reply on 1/3/2016, having argued towards the total lack of merit of the Applicant's request, and having further invoked an exception for lack of jurisdiction of the Arbitral Tribunal.

1.4. The now Applicant, in a motion dated 25/5/2016, pronounced itself on the exception invoked by the TA, having, in summary, considered the same "without merit for not being proven".

1.5. By order of 31/5/2016, the Tribunal considered that, as the now Applicant had already pronounced itself on the exception invoked by the Defendant – thus being fulfilled what is provided in art. 18, no. 1, let. b), of the LFATM –, it was dispensable, under the provisions of art. 16, let. c), of the LFATM, the meeting provided for in the said article 18, and that the case was ready for decision. In these terms, the date of 7/6/2016 was set for the pronouncement of the arbitral decision.

1.6. On 31/5/2016, the Defendant requested the joinder to the record of the Administrative Opinion no. 396/2015-T; and, on 1/6/2016, the Applicant requested the joinder to the record of the Administrative Opinion no. 683/2015-T.

1.7. The Arbitral Tribunal was regularly constituted, is materially competent, the case is not affected by vices that would invalidate it (see infra, "preliminary question") and the Parties have legal personality and capacity, being legitimate.

II – Allegations of the Parties

2.1. The now Applicant comes to allege, in its initial petition, that: a) "the assessments [now in question] are affected by illegality due to violation of the provisions of article 103 (Tax System), number 3, of the Constitution of the Portuguese Republic and must, consequently, be declared null"; b) "IMT is a single-obligation tax [...]. This classification is relevant here insofar as the IMT and IS exemptions, contained, respectively, in numbers 7, letter a), and 8 of article 8 (Tax Regime) of the Tax Regime of FIIAH, were recognized at the request of Fund B…, pursuant to article 10 (Recognition of Exemptions) of the IMT Code, at a moment prior to the entry of the relevant real estate properties into the patrimony of Fund B…. That is, at the moment in which the real estate properties – subject of the Assessments – entered into the patrimony of Fund B…, the IMT and IS exemptions provided, respectively, in numbers 7, letter a), and 8 of article 8 (Tax Regime) of the Tax Regime of FIIAH were definitively crystallized in the tax legal order"; c) "in effect, the fact subject to taxation is, both in the context of IMT and in the context of IS, the acquisition of ownership of the relevant real estate properties by Fund B… . And the IMT and IS exemptions were not, at the time when they entered into the patrimony of Fund B…, conditioned by the subsequent verification of any facts or circumstances nor, likewise, subject to any regime of expiration"; d) "not being [...] legally provided, at the moment of recognition of the exemption, any facts or circumstances on which the expiration of the recognized exemption depended, it is manifest that the subsequent imposition of such facts or circumstances to exemptions crystallized in the tax legal order of the Applicant is affected by unconstitutionality, due to 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"; e) "article 236 (Transitional Norm within the Scope of the Special Regime Applicable to FIIAH and SIIAH) of Law no. 83-C/2013, of 31 December, when extending the application of the current Tax Regime of FIIAH 'to the real estate properties that have been acquired by FIIAH before 1 January 2014, in which cases the three-year period provided in no. 14 shall be counted from 1 January 2014' - is directly and unequivocally violating the principle of non-retroactivity of tax law constitutionally enshrined. In effect, the extension established therein configures a new regime of expiration of the exemptions provided in numbers 7, letter a) and 8 (Tax Regime) and not a mere densification of a criterion previously provided"; f) "in the case sub judice there are no doubts whatsoever that the tax facts that the new law intends to regulate have already produced all their effects under the old law"; g) "it is here necessary to clarify whether the unconstitutionality now argued by the Applicant should have as consequence the voidability or the nullity of the Assessments [...]. [...]. Considering that the principle of fiscal non-retroactivity has the character of a fundamental right, endowed with the protective legal regime of this right, its disrespect originates the nullity of the act, in this case, the nullity of the Assessments"; h) "the admissibility of Challenging the vice of nullity without time limit does not preclude the jurisdiction of the Arbitral Tax Tribunal, designedly, by literal interpretation of article 10 (Request for constitution of the arbitral tribunal) of the LFATM. In effect, the cited article 10 (request for constitution of the arbitral tribunal) of the LFATM should not be interpreted in the sense of being exclusively applicable to situations in which acts are in question whose challenging is subject to a time limit"; i) "without admitting and by mere caution of representation, admitting, alternatively, that the vice (illegality) of the Assessments determines their voidability (and not nullity), the Assessments should be voided accordingly, pursuant to articles 10, no. 1, letter a), of the LFATM and article 102, no. 1, letter a), of the Code of Tax Procedure and Process."

2.2. By the above, the now Applicant seeks, in summary: "(I) [that it be] declared the nullity of the Assessments based on their unconstitutionality; alternatively, should it not be understood as such, the Assessments to be voided"; "(II) [to be] reimbursed [...] by the entire amount paid by force of the Assessments subject of the present request for arbitral pronouncement, increased, pursuant to article 43 (Unduly Paid Tax Obligation) of the General Tax Law, with the indemnificatory interest that is due until the date of such reimbursement."

2.3. For its part, the TA comes to allege, in its reply, that: a) "the Arbitral Tribunal does not have jurisdiction to assess or declare the constitutionality or unconstitutionality of article 236 of Law 83-C/2013, of 31 December, as in substance the Applicant intends"; b) "the jurisdiction for abstract review of legality and constitutionality is reserved to the Constitutional Court as is established in article 281 of the CRP"; c) "the Arbitral Tribunal is incompetent to carry out an abstract review either of legality or of constitutionality of article 236 of Law 83-C/2013, of 31 December"; d) "the incompetence of the Arbitral Tribunal to proceed with the abstract assessment of constitutionality constitutes a dilatory exception that prevents the continuation of the proceedings, leading to the dismissal of the claim as to the claim in question, in accordance with what is provided in article 576/1 and 2 and in article 577-a) of the CPC, applicable ex vi of article 29/1-e) of the LFATM"; e) "the Applicant alleges that the challenged assessments offend the fundamental content of a right and as such are null in accordance with what is prescribed in letter d) of no. 2 of article 133 of the CPA in the version in force at the time of the facts"; f) "the Supreme Administrative Court has pronounced itself in the sense that acts that offend the essential content of a fundamental right must be those that contend with the rights, freedoms and guarantees of citizens"; g) "[...] and, according to the jurisprudence emanating from this court, the tax acts that contend with the principle of legality are voidable, but not null. [...]. From the above it thus results that the challenged assessments do not offend the essential content of a fundamental right, and even if any vice were to occur, the same should be sanctioned with voidability and not with nullity"; h) "the Applicant considers that the challenged assessments are illegal, since, in its understanding, article 236 of Law 83-C/2013, of 31 December, which approved the state budget for 2014, is unconstitutional due to violation of article 103 of the Constitution of the Portuguese Republic"; i) "it thus clearly results [from the changes introduced by art. 236 of the Law that approved the State Budget for 2014 and that altered the special temporary regime applicable to FIIAH] that from 1 January 2014 the IMT exemption of real estate integrated in the Fund for purposes of rental was extended until 2015, however, for purposes of compliance with the requirement of dedication of the real estate to housing, proof of the existence of a rental contract for permanent housing began to be required"; j) "the said law regulated the application in time of the changes introduced in the following terms, having established that these changes apply: a) To the real estate properties that have been acquired by FIIAH from 1 January 2014; b) To the real estate properties that have been acquired by FIIAH before 1 January 2014 and the period of 3 years is counted from 01.01.2014; that is, the law establishes a transitional period for application of the changes so that the new requirement established in the law is only assessed for the future. A different situation would be if the legislator had not enshrined this transitional period making all current exemptions lapse that did not prove they possessed the legal requirements"; l) "the Applicant considers that it is not legitimate for the legislator to subsequently impose any facts or circumstances that determine the lapse of the right to the exemption in obedience to the principle of non-retroactivity of tax law. It is important first of all to note that the law did not establish any new requirement, but only granted a period for compliance with that requirement. A period that only begins after the entry into force of the new law"; m) "it is not therefore a matter of altering the assumptions, conditions of attribution or recognition of a tax benefit, but solely and only, regulating the period of time for purposes of proving compliance with a requirement previously established"; n) "in obedience to the constitutional principle of non-retroactivity of taxes, tax norms apply to facts subsequent to their entry into force, in consonance with the general principle of application of laws in time according to which, in the absence of express attribution of retroactive effectiveness, the law only applies for the future (art. 103, no. 3, of the CRP; art. 12, no. 1, of the GTL; art. 12, no. 1, of the Civil Code). Now, as is verified in the case at hand, the counting of the 3-year period referred to in the new law for the conclusion of the rental contract only occurs after the entry into force of the new law"; o) "there is no situation of retroactivity of tax law verified in the case at hand"; p) "there is no illegality or unconstitutionality of the assessment acts nor legal ground that supports the claim of the Applicant, the request for reimbursement of the amounts paid by the Applicant is therefore without merit, as well as the payment of indemnificatory interest"; q) "the request [...] for payment of indemnificatory interest is without merit since there is no error in the performance of the requested entity, much less an error attributable to the services, thus excluding the application of article 43 of the GTL".

2.4. The TA concludes, finally, that "the exceptions invoked [exception of lack of jurisdiction] should be judged as well-founded, or, should it be decided otherwise, the present arbitral action should be judged without merit, absolving the requested entity of the claim with the further legal consequences."

III – Proven, Unproven Factuality and Respective Grounds

3.1. The following facts are considered proven:

i) The now Applicant requested from the TA the assessment of IMT and IS of the acts of alienation of real estate properties by "Fund B…", according to the following information: real estate property located at…, nos. … and … R, fraction… of article 28, registered in the urban property register of the parish of…; IMT assessment no. … and IS assessment no.…, in the respective amounts of €15.919,19 and €2.695,44 (which, when added together, correspond to the overall amount at issue: €18.614,63) – see Doc. 1 attached to the record.

ii) The real estate property now in question was acquired benefiting from the IMT and IS exemptions contained, respectively, in no. 7, let. a), and no. 8 of article 8 of the special regime applicable to FIIAH (which were recognized at the request, pursuant to art. 10 of the IMT Code).

iii) The above-mentioned assessments were paid by the Applicant on 19/8/2015, according to copies of the respective collection slips that are contained in Doc. 2 attached to the record.

iv) Dissatisfied with the said assessments, the now Applicant presented its request for arbitral pronouncement on 18/11/2015.

3.2. There are no unproven facts relevant to the decision of the case.

3.3. The facts considered pertinent and proven (v. 3.1) are grounded in the analysis of the positions exposed by the parties and the documentary evidence attached to the record.

IV – Preliminary Question

As referred to in the report of the present decision, the Defendant invoked, in the reply of 1/3/2016, the exception of lack of jurisdiction of the present Arbitral Tribunal. It is thus necessary to ascertain whether the same is well-founded, taking into account, also, what is contained in the motion of the Applicant of 25/5/2016, in which it pronounces itself on that exception.

The Defendant alleges, in its reply, that "the Arbitral Tribunal does not have jurisdiction to assess or declare the constitutionality or unconstitutionality of article 236 of Law 83-C/2013, of 31 December, as in substance the Applicant intends", since "the jurisdiction for abstract review of legality and constitutionality is reserved to the Constitutional Court as is established in article 281 of the CRP", and that "the Arbitral Tribunal is incompetent to carry out an abstract review either of legality or of constitutionality of article 236 of Law 83-C/2013, of 31 December". It concludes, by the above cited, that the Arbitral Tribunal is incompetent "to proceed with the abstract assessment of constitutionality", an incompetence that "constitutes a dilatory exception that prevents the continuation of the proceedings, leading to the dismissal of the claim as to the claim in question, in accordance with what is provided in article 576/1 and 2 and in article 577-a) of the CPC, applicable ex vi of article 29/1-e) of the LFATM".

However, it happens that, as is observed from the reading of the present record, the Applicant did not ask for the declaration of unconstitutionality or the abstract review of legality. Although the Applicant refers, at the beginning of its initial petition, that it intends "to assess whether article 236 [...] constitutes a new regime [...], revealing an unequivocal violation of the principle of non-retroactivity of tax law, embodied in article 103 [...], no. 3, of the Constitution of the Portuguese Republic", the request made, in the end, proves that the Applicant intends that it be declared "the nullity [or voidability] of the Assessments based on their unconstitutionality", or, as the Applicant reaffirms, in its motion of 25/5/2016, "on the ground that [the assessments in question] are based on the application of a norm that violates the Constitution and the law".

Now, while it is true that the Arbitral Tribunal does not have jurisdiction to assess or declare the unconstitutionality of norms, it is not forbidden to it, however, either the refusal to apply any norm on the ground of its unconstitutionality, or the application of a norm whose unconstitutionality has been raised during the proceedings. These two cases are, precisely, those that make possible, pursuant to the provisions of arts. 280, no. 1, lets. a) and b), of the Constitution of the Portuguese Republic, and 25, no. 1, of the LFATM, the recourse of arbitral decisions to the Constitutional Court.

By the above stated, it is concluded that the invoked exception of lack of jurisdiction is without merit.

V – On the Law

In the case here under analysis, there are two controversial legal questions: 1) to know whether the IMT and IS assessments are illegal because carried out under article 236 of Law 83-C/2013, of 31/12, which the Applicant understands to be unconstitutional due to violation of the provisions of article 103 of the CRP (and, further, null due to alleged injury of essential content of a fundamental right, pursuant to article 133, no. 2, let. d), of the CPA); and 2) to know whether indemnificatory interest is due to the Applicant.

Let us then examine.

  1. The now Applicant alleges that the assessments in question are illegal because carried out under art. 236 of Law no. 83-C/2013, of 31/12 (State Budget 2014) – an article which the Applicant considers unconstitutional due to violation of the said art. 103 of the CRP.

In its understanding, "article 236 (Transitional Norm within the Scope of the Special Regime Applicable to FIIAH and SIIAH) of Law no. 83-C/2013, of 31 December, when extending the application of the current Tax Regime of FIIAH 'to the real estate properties that have been acquired by FIIAH before 1 January 2014, in which cases the three-year period provided in no. 14 shall be counted from 1 January 2014' – is directly and unequivocally violating the principle of non-retroactivity of tax law constitutionally enshrined. In effect, the extension established therein configures a new regime of expiration of the exemptions provided in numbers 7, letter a) and 8 (Tax Regime) and not a mere densification of a criterion previously provided." By the above stated, the now Applicant concludes that "in the case sub judice there are no doubts whatsoever that the tax facts that the new law intends to regulate have already produced all their effects under the old law".

This does not appear, however, to be the question at issue here.

First of all, it is convenient to observe Law no. 64-A/2008, of 31/12, which approved the special regime applicable to FIIAH. In that regime it was provided, in particular: in no. 7 of article 8, that there were exempted from IMT "the acquisitions of urban real estate properties or of autonomous fractions of urban real estate properties intended exclusively for rental for permanent housing" by the said funds; and, in no. 8 of that same article, that there were exempted from IS "all acts practiced, inasmuch as connected with the transmission of urban real estate properties intended for permanent housing that occurs by force of the conversion of the right of ownership of such real estate properties into a right of rental over the same".

Law no. 83-C/2013, of 31/12, altered the wording of the said art. 8, adding nos. 14 to 16, which are here reproduced:

"14 - For purposes of the provisions of nos. 6 to 8 of the said art. 8, it is considered that 'urban real estate properties are intended for rental for permanent housing whenever they are subject to a rental contract for permanent housing within three years counted from the moment in which they became part of the fund's patrimony, the passive subject being required to communicate and provide proof to the TA of the respective effective rental, within 30 days following the end of the said period.

15 - When the real estate properties have not been subject to a rental contract within the three-year period provided in the previous number, the exemptions provided in nos. 6 to 8 cease to have effect, the passive subject being required in that case to request from the TA, within 30 days following the end of the said period, the assessment of the respective tax.

16 - In the event the real estate properties are alienated, with the exception of cases provided for in article 5, or in the event the FIIAH is subject to liquidation, before the period provided in no. 14 has elapsed, the passive subject must likewise request from the TA, before the alienation of the real estate property or the liquidation of the FIIAH, the assessment of the tax due pursuant to the previous number".

In art. 236 of the said Law no. 83-C/2013, of 31/12, the following transitional norm was further enshrined:

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

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

From this it is concluded that the said Law established a transitional period for application of the legal changes, with a view, as the Defendant alleges (see §24 to 28 of the reply), to avoiding the lapse of "all current exemptions that did not prove they possessed the legal requirements". It adds, further, that "the law did not establish any new requirement, but only granted a period for compliance with that requirement. A period that only begins after the entry into force of the new law."

In the same sense, the Administrative Opinion dated 14/3/2016, handed down in proc. 398/2015-T, emphasizes that "the obligation to dedicate the real estate property to housing rental is not a requirement of the changes introduced by the State Budget for 2014, but rather a requirement of the tax regime of FIIAH ab initio, moreover a natural consequence of the motivations that led to the creation of these funds. However, this was not the case at issue [...]. The IMT assessments carried out [...] were not based on their retention in the fund for a period equal to or greater than 3 years without there having been dedication to rental for permanent housing. [...]."

In effect, as is also referred to in the Administrative Opinion dated 22/4/2016, handed down in proc. no. 691/2015-T: "The State Budget for 2014 comes, it is certain, to establish a new requirement for the exemption: in the event that dedication to rental for permanent housing does not occur within the period of 3 years following the entry of the real estate property into the fund, the fund must request the assessment of the IMT that was not assessed. However, this was not the case at issue [...]. The IMT and Stamp Duty assessments in question were not based on its retention in the fund for a period equal to or greater than 3 years without there having been dedication to rental for permanent housing. [...]. In fact, the assessments in question, as results from the assessment notes attached to the case, were based on the fact that the real estate properties were given 'a purpose different from that on which the benefit was based' [see also, in the case of the present record, the same description, which appears in the documents contained in Doc. 1 attached to the record]. Thus, we understand that the issue is not the retroactivity, or not, of the applied norm".

In fact, it is sufficiently demonstrated that the real estate property in question was alienated, with the consequent dedication of the same to a purpose different from that for which the exemptions were granted. This is not here, therefore, a matter of a time period, as the now Applicant alleged.

In this regard, and as is also well emphasized by the Administrative Opinion dated 2/5/2016, handed down in proc. 689/2015-T, "the alienation of the real estate property would always determine the lapse of the exemption by application of the provisions of no. 3 of article 14 of the EBF, thus not being, in the situation sub judice, any application of retroactive norm that comes to introduce a new regime of expiration of the exemptions, neither is there any injury to the expectations of the Applicant or aggravation of its tax position, whereby we understand that the IMT and Stamp Duty assessments at issue are legal. It is thus moot the analysis of the question raised by the Applicant as to the alleged retroactivity of the regime provided for by article 236 of the State Budget Law for 2014 to the extent that, as above it was demonstrated, the circumstances that originated the tax assessments at issue are in no way related to the additions originated by the said article, solely with the alienation of the real estate property and consequent dedication to an end different from that for which the IMT and Stamp Duty exemptions were granted."

For the reasons noted, with which agreement is had, it is concluded – also in the present case –, that the analysis of the question of the alleged retroactivity of the regime contained in art. 236 is moot, and that there did not occur, as a result of the assessments in question, unjustified injury to the expectations of the now Applicant or an unjustified aggravation of its tax position. In these terms, it is consequently concluded that the IMT and IS assessments now in question should be maintained entirely in the legal order.

It should be noted, lastly, and as a final note, that, in the present case, there would never be in question the (also alleged by the Applicant) nullity due to "injury of essential content of a fundamental right", since, as has been the uniform understanding of the jurisprudence of the SAC, the vice of violation of law due to error in the legal assumptions (which is what might be at issue here) generates mere voidability, unless the tax act contended against the content of a fundamental right (a situation which, clearly, is not at issue here) – which does not happen even if there has been violation of the principles of tax legality or non-retroactivity of tax law (see, in this regard and by way of mere example, the following Decisions of the SAC: no. 1709/03, of 28/1/2004; no. 1938/03, of 3/3/2004; no. 1259/04, of 22/5/2005; no. 669/05, of 9/11/2005; no. 612/05, of 23/11/2005; no. 231/13, of 26/6/2013; no. 481/13, of 26/2/2014; no. 1916/13, of 12/3/2014; no. 703/14, of 21/1/2015).

See also, in the same sense, the following excerpt from the Decision of the LCAC of 26/3/2015 (proc. 00354/08.0BEPRT): "The Appellant alleges [...] that the tax at issue is null [...] due to injury of the essential content of a fundamental right. It results from the provisions of art. 133, nos. 1 and 2, letter d), of the Code of Administrative Procedure applicable ex vi of 2, letter c), of the GTL, that the acts are null to which any of the essential elements lacks or for which the law expressly provides that form of invalidity, in particular the acts that injure the essential content of a fundamental right. The Appellant is not correct [in its allegation]. The acts that injure a fundamental right must be those that contend with the rights, freedoms and guarantees of citizens; not those that contend solely with the principle of legality, as happens in the case of the record. [...] it is settled in the jurisprudence of tax contentious proceedings that the nullity of a norm on which an assessment act is based does not imply the nullity of the latter, generating only a situation of abstract illegality of the assessment [...] (cf. in that sense, among many others, the decisions of the SAC of 25/05/2004, proc. no. 208/04, 9/11/2005, proc. 669/05, 7.05.2008, proc. no. 1034/07, of 5.07.2007, proc. no. 479/06, of 16/09/2009, proc. no. 0418/09, and of 23/10/2013, proc. no. 0579/13). Thus being, the tax act that applies allegedly unconstitutional norms [...] does not originate the nullity of the assessment, but generates mere voidability, being a question of vice of violation of law due to error in the legal assumptions."

  1. Pursuant to article 43, no. 1, of the GTL, indemnificatory interest is due when it is determined, in administrative reclamation or judicial challenge, that there has been error attributable to the services from which results payment of the tax debt in an amount greater than legally due.

It is, therefore, a necessary condition for the attribution of the said interest the demonstration of the existence of error attributable to the services. In that sense, see, for example, the following decisions: "The right to indemnificatory interest provided for in no. 1 of art. 43 of the GTL [...] depends on it being demonstrated in the proceedings that that act is affected by error regarding the factual or legal assumptions attributable to the TA." (Decision of the SAC of 30/5/2012, proc. 410/12); "The right to indemnificatory interest provided for in no. 1 of article 43 of the General Tax Law presupposes that in the proceedings it be determined that in the assessment there was 'error attributable to the services', understood as the 'error regarding the factual or legal assumptions attributable to the Tax Administration'" (Decision of the SAC of 10/4/2013, proc. 1215/12).

Now, there not having been, as results from what was said in 1), any error attributable to the services, it is concluded by the lack of merit of the request for payment of indemnificatory interest to the Applicant.

VI – DECISION

In view of what has been stated above, it is decided:

  • To judge without merit the request for arbitral pronouncement, the assessment acts now challenged remaining entirely in the legal order, and the requested entity being accordingly absolved of the claim.

  • To judge without merit the request also in the part that concerns the recognition of the right to indemnificatory interest in favor of the applicant.

The value of the proceedings is fixed at €18.614,63 (eighteen thousand six hundred and fourteen euros and sixty-three cents), pursuant to art. 32 of the CAPT and art. 97-A of the CPPT, applicable by force of the provisions of art. 29, no. 1, lets. a) and b), of the LFATM, and art. 3, no. 2, of the Regulation on Costs in Tax Arbitration Proceedings (RCTAP).

Costs charged to the Applicant, in the amount of €1224,00 (one thousand two hundred and twenty-four euros), pursuant to Table I of the RCTAP, and in compliance with the provisions of articles 12, no. 2, and 22, no. 4, both of the LFATM, and the provision in art. 4, no. 4, of the said Regulation.

Notify.

Lisbon, 7 June 2016.

The Arbitrator

(Miguel Patrício)

Text drawn up by computer, in accordance with the provisions of art. 131, no. 5, of the CPC, applicable by referral of art. 29, no. 1, let. e), of the LFATM.

The wording of the present decision is governed by the spelling prior to the Orthographic Agreement of 1990.

Frequently Asked Questions

Automatically Created

What is the IMT and Stamp Tax exemption regime applicable to FIIAH real estate investment funds in Portugal?
The IMT and Stamp Tax exemption regime for FIIAH (Fundos de Investimento Imobiliário para Arrendamento Habitacional) in Portugal is established under Article 8 of the special FIIAH tax regime. Article 8(7)(a) provides an exemption from IMT (Imposto Municipal sobre Transmissões) for property acquisitions by FIIAH funds, while Article 8(8) provides an exemption from Stamp Tax (Imposto de Selo). These exemptions must be recognized by the Tax Authority pursuant to Article 10 of the IMT Code before the property acquisition occurs. Originally, these exemptions were unconditional and not subject to expiration periods. However, Law 83-C/2013 introduced Article 8(14) establishing a 3-year expiration mechanism for exemptions, fundamentally altering the regime for properties acquired after the law's effective date of January 1, 2014.
Why was Article 236 of Law 83-C/2013 challenged as unconstitutional before the CAAD arbitral tribunal?
Article 236 of Law 83-C/2013 was challenged as unconstitutional because it retroactively applied the new FIIAH tax regime, including the 3-year exemption expiration period under Article 8(14), to properties acquired by FIIAH funds before January 1, 2014. The applicant argued this constituted a violation of Article 103(3) of the Portuguese Constitution, which prohibits retroactive tax laws. The key constitutional issue was that the IMT and Stamp Tax exemptions had been definitively granted and crystallized in the legal order at the time of property acquisition, without any conditions or expiration mechanisms. Article 236's transitional provision imposed new expiration conditions on already-completed tax facts, essentially creating new tax liabilities for transactions that were fully exempt under the law in force at the time. The applicant contended this was not merely a clarification or densification of existing rules, but rather a fundamental change to the tax regime applied retrospectively.
Does the principle of non-retroactivity of tax law under Article 103(3) of the Portuguese Constitution apply to FIIAH tax exemptions?
Yes, the principle of non-retroactivity of tax law under Article 103(3) of the Portuguese Constitution applies to FIIAH tax exemptions, according to the applicant's legal argument. Article 103(3) establishes that 'no tax shall be created or increased retroactively.' This constitutional principle protects taxpayers from legislative changes that worsen their tax position regarding completed facts. The applicant argued that IMT and Stamp Tax are single-obligation taxes where the taxable event (acquisition of property ownership) occurs at a specific moment. When Fund B acquired properties with recognized exemptions, those exemptions became definitively incorporated into the fund's legal tax position without conditions or expiration dates. The subsequent imposition of a 3-year expiration period through Article 236 constituted retroactive taxation because it modified the legal consequences of past facts that had fully produced their effects under prior law. Since non-retroactivity of tax law is enshrined as a fundamental right in the Constitution, its violation would result in nullity of the tax assessments rather than mere voidability.
What is the CAAD arbitral procedure for disputing IMT and Stamp Tax liquidations issued by the Portuguese Tax Authority (AT)?
The CAAD (Centro de Arbitragem Administrativa) arbitral procedure for disputing IMT and Stamp Tax liquidations follows the Legal Framework for Arbitration in Tax Matters (RJAT - Decree-Law 10/2011). Under Article 2(1)(a) of RJAT, taxpayers may request constitution of an arbitral tribunal to challenge tax assessments. The procedure begins with filing a request within the applicable deadline (or without time limit for nullity claims, according to the applicant's interpretation). Article 10 of RJAT governs the request requirements. Once filed, the arbitral tribunal is constituted (here, a singular tribunal). The Tax Authority is notified as defendant and must present a reply pursuant to Article 17. The applicant may respond to any exceptions raised by the defendant. Under Article 16(c), an in-person hearing may be dispensed with if unnecessary. The tribunal then issues a decision within the established timeframe. Article 18 governs procedural aspects. If successful, the taxpayer obtains reimbursement of amounts paid plus compensatory interest under Article 43 of the General Tax Law (LGT). This arbitration mechanism provides an alternative to judicial courts for resolving tax disputes efficiently.
How does the transitional rule in Article 236 affect properties acquired by FIIAH before 1 January 2014?
The transitional rule in Article 236 of Law 83-C/2013 extends the new FIIAH tax regime to properties acquired before January 1, 2014, with a critical modification to the timing of the 3-year expiration period. Specifically, Article 236 provides that for properties acquired by FIIAH funds before January 1, 2014, the 3-year period established in Article 8(14) begins counting from January 1, 2014, rather than from the original acquisition date. This means that properties acquired years earlier under an unconditional exemption regime suddenly became subject to a 3-year deadline counting from 2014, after which the exemptions would expire and the properties would become subject to IMT and Stamp Tax. In the present case, Fund B acquired properties before 2014 with recognized exemptions that had no expiration conditions. Article 236 imposed a deadline whereby these exemptions would expire by January 1, 2017 (three years from 2014), triggering the tax assessments that led to this arbitration. The applicant challenged this as unconstitutional retroactive taxation affecting vested rights.