Process: 695/2018-T

Date: May 6, 2019

Tax Type: IMT

Source: Original CAAD Decision

Summary

This CAAD arbitration decision (Process 695/2018-T) addresses whether closed real estate investment funds qualify for IMT (Municipal Property Transfer Tax) exemption under Decree-Law 1/87. The claimant, a management company representing a closed real estate investment fund, challenged an IMT assessment of €19,864.75 levied on the acquisition of two properties in the Algarve in December 2017. The fund argued that Decree-Law 1/87, originally granting SISA (predecessor to IMT) exemptions to real estate investment funds, remained in force after the 2003 transition to IMT. The key legal question centered on whether Article 31(6) of Decree-Law 287/2003, which converted SISA exemptions to IMT exemptions, maintained the validity of the 1987 exemption regime. The claimant contended that the Portuguese Tax Authority unlawfully ceased applying this exemption without legal basis, and that Article 46 of the Tax Benefits Statute, which provides separate IMT exemptions for properties already included in fund portfolios, does not repeal the acquisition-stage exemption under Decree-Law 1/87. The AT failed to submit a response to the arbitration claim. The arbitrator, Professor Jónatas Machado, was tasked with determining whether the historic SISA exemption for fund acquisitions survived legislative reforms and continues to apply to IMT, or whether subsequent legislation implicitly repealed this benefit. This case has significant implications for real estate investment fund taxation in Portugal and the interpretation of transitional provisions in tax reform legislation.

Full Decision

ARBITRAL DECISION

The Arbitrator Professor Doctor Jónatas Machado, designated by the Ethics Board of the Administrative Arbitration Center to serve on the present Arbitral Tribunal, constituted on 07.03.2019, hereby renders the following decision:

1 REPORT

1. A..., S.A. (hereinafter "Claimant"), holder of the tax identification number ... and with registered office at Av. ..., ..., ..., ...-... ..., in its capacity as managing company and in representation of B...-Special Closed Real Estate Investment Fund (hereinafter designated "Fund"), with the tax identification number ..., pursuant to paragraph a) of Article 2(1) and Articles 10(1) and 10(2), all of Decree-Law No. 10/2011, of 20 January ("Legal Framework of Arbitration in Tax Matters" or "RJAT") and Articles 1 and 2 of Administrative Order No. 112 A/2011, of 22 March, requested the constitution of an arbitral tribunal.

2. The request for constitution of the arbitral tribunal was accepted by the President of CAAD on 28.12.2018.

3. In accordance with Articles 5(2)(a), 6(1) and 11(1) of the RJAT, the Ethics Board of this Administrative Arbitration Center (CAAD) designated Professor Doctor Jónatas Machado as sole arbitrator on 15.02.2019.

4. The parties were duly notified of this designation, to which they did not object, in accordance with the joint provisions of Articles 11(1)(b) and (c) and 8 of the RJAT and Articles 6 and 7 of the Ethics Code of CAAD.

5. By virtue of the provisions of Article 11(1)(c) and Article 11(8) of the RJAT, as communicated by the President of the Ethics Board of CAAD, the Arbitral Tribunal was constituted on 07.03.2019.

6. The Claimant seeks that the illegality of the decisions dismissing the administrative appeal be reviewed, issued by the Tax and Customs Authority ("AT"), in the context of proceedings numbered ...2018... and ...2018... and, consequently, that the cancellation of the tax assessment imposing Municipal Tax on Onerous Transfer of Real Property ("IMT") with number ... issued by AT, in the total amount of € 19,864.75, be ordered, with full restitution of the assessed tax, plus the corresponding compensatory interest.

7. The AT (or Respondent), having been notified, pursuant to Article 17 of the RJAT, to present its response, notified the file on 19.03.2019 that it would not do so.

8. As it was not requested by the parties and was considered unnecessary, the tribunal waived the hearing provided for in Article 18 of the RJAT, by means of an order rendered on 30.03.2019.

1.1 Description of Facts

9. The Fund commenced its activities on 7 December 2006, configuring itself as a closed real estate investment fund, managed by the managing company Claimant.

10. In the exercise of its activity, the Fund, here represented by the Claimant, acquires multiple real properties, which it manages in accordance with the terms and conditions of its investment policy.

11. On 20 December 2017, the Claimant, in representation of the Fund, acquired, by public deed of purchase and sale, the urban property with matriculation article ... and the rural property with matriculation article ..., section D, both located in the parish of ..., municipality of ... (Algarve), in consideration of payment of prices of, respectively, €380,000.00 and €10,000.00.

12. With reference to the acquisition operation mentioned above, IMT assessment number ... was issued, in the amount of €19,864.75, and the corresponding payment was made in full and on time.

13. Not agreeing with the tax assessment, the Claimant filed an administrative appeal against it, having been notified in October 2018 of its dismissal, as the AT understood that the acquisition of the said properties could not benefit from the IMT exemption established in Decree-Law No. 1/87, of 3 January.

1.2 Arguments of the Parties

14. The arguments brought before the tribunal focus on the applicability and effectiveness at the time of the relevant facts, for IMT purposes, of Decree-Law No. 1/87, of 3 January.

15. The Claimant alleges that the assessment in question is illegal with arguments summarized as follows:

a) The Fund sub judice is a closed real estate investment fund, whose activity is currently regulated in accordance with the provisions of the General Framework of Collective Investment Undertakings, approved by Law No. 16/2015, of 24 February;

b) The legal regulation of real estate investment funds was initially promoted through the approval of Decree-Law No. 246/85, of 12 July, through which the legislator recognized the important contribution of these entities to the formation of savings, to the mobilization of investments in the real estate sector and also to the promotion of the construction industry and the rental market;

c) Given the relevance assumed by the activity developed by these investment funds, it became necessary to establish the rules and conditions applicable to their creation and operation, and it also seemed urgent to define an appropriate tax framework;

d) Decree-Law No. 1/87, of 3 January, created a set of tax incentives for the creation of these investment funds, exempting from Stamp Duty on Real Property (SISA) the acquisitions of immovable assets made for a real estate investment fund by the respective managing company;

e) Decree-Law No. 287/2003, of 12 November, expressly repealed the SISA Code and approved the IMT Code;

f) This statute expressly provided in Article 28(2) under the heading "Cross-References" the correspondence to IMT of all references to SISA made in all legal texts and maintained in force the tax benefits relating to municipal property tax, now reported to Real Estate Tax ("IMI"), as well as those relating to the municipal stamp duty on real property established in extraordinary legislation, to the Code approved by Decree-Law No. 41969, of 24 November 1958, and in the Tax Benefits Statute, which are now to be reported to IMT in Article 31(6) thereof;

g) It was the express intention of the legislator that the exemptions applicable to the extinct Municipal Stamp Duty on Real Property and established in extraordinary legislation (such as Decree-Law No. 1/87, of 3 January) should continue to apply in the case of IMT;

h) The mentioned SISA exemption, provided for in Article 1 of Decree-Law No. 1/87, of 3 January, came to apply to IMT and still remains in force today, despite the legislative amendments made, covering the operations of acquisition of immovable assets carried out by a managing company of a real estate investment fund with the intention that they should become part of that fund's assets;

i) From Article 1 of Decree-Law No. 1/87, of 3 January, and from the wording given to Article 31(6) of Decree-Law No. 287/2003, of 12 November, nothing results that it had assigned any indication of temporary validity;

j) The reading of Article 46 of the Tax Benefits Statute also expressly rules out any intention, on the part of the legislator, to give this rule an express or implicit repealing character of Article 1 of Decree-Law No. 1/87, of 3 January, insofar as the creation of an exemption from Real Estate Tax or IMT for properties included in real estate investment funds does not repeal, expressly or implicitly, an exemption for properties that become part of the respective assets;

k) The AT ceased at some point, without any legal basis, to apply the exemption rule under analysis, leading to successive and unlawful assessment of tax not owed;

l) Article 46 of the Tax Benefits Statute, in the 2007 version in force in 2014, exempted from IMT properties included in real estate investment funds, pension funds and retirement savings funds that are established and operate in accordance with national legislation, although excluding from this exemption – but only at a rate reduced by half – properties included in mixed or closed real estate investment funds with private subscription by non-qualified investors or by financial institutions on their account, but in no way repeals, expressly or implicitly, Article 1 of Decree-Law No. 1/87, of 3 January;

m) These are distinct benefits of legal complementarity, because, while in the case of Article 1 of Decree-Law No. 1/87, of 3 January, the exemption applies whenever the fund is in the position of acquirer of the property, in the case provided for in Article 46 of the Tax Benefits Statute the exemption encompasses situations where the fund is in the position of alienating owner of the properties;

n) The simple introduction of the exemption of Article 46 of the Tax Benefits Statute can hardly be interpreted as a measure of repeal and replacement of the exemption created by Article 1 of Decree-Law No. 1/87, of 3 January," because that article did not come to regulate all the matters contained in the latter, limiting itself to introducing a new exemption in addition to the already existing one, which remains untouched;

o) The introduction and evolution of the regime of Article 46 (and later 49) of the Tax Benefits Statute, concerning the exemption and reduction of the IMT rate for transactions involving immovable assets included in real estate investment funds has its own useful effect and in no way affects the useful effect of the exemption created by Article 1 of Decree-Law No. 1/87, of 3 January, regarding acquisitions of immovable assets to be included in real estate funds, so there is no reason to conclude that the later repealed, even if implicitly, the earlier;

p) The fact that Law No. 3-B/2010, of 3 April, came, through its Article 109, to amend Article 49 of the Tax Benefits Statute, limiting the applications of the exemptions provided for in Article 49(1) exclusively to open real estate funds, pension funds and retirement savings funds that are established and operate in accordance with national legislation and to repeal Article 49(2) thereof, in no way contends with the maintenance in force of the exemption provided for in Article 1 of Decree-Law No. 1/87, of 3 January;

q) Neither does the repeal of Article 49 of the Tax Benefits Statute by Article 215 of Law No. 7-A/2016, of 30 March, raise the question of the hypothetical restoration of Article 1 of Decree-Law No. 1/87, justifying, inasmuch as this never ceased to be in force;

r) There being no doubts as to the fact that the exemption sub judice was never repealed, it is necessary to conclude that exempt from IMT are the operations of acquisition of properties carried out by a managing company for the assets of (in representation of) real estate investment funds managed and administered by it, regardless of the typology of these funds, as occurred in the specific case;

s) The operation of acquisition of properties described above, carried out by the managing company - now Claimant - in representation of the Fund managed and administered by it, should have benefited from the IMT exemption established in Article 1 of Decree-Law No. 1/87, of 3 January, because it is still in force and consequently still applicable -- which did not occur.

16. The AT communicated to the file that it decided not to present a response.

2 JOINDER OF ISSUES

17. The request for arbitral ruling is timely, in accordance with Article 10(1) of the RJAT.

18. The Arbitral Tribunal is regularly constituted (Articles 5(2), 6(1), and 11 of the RJAT), and is materially competent (Article 2(1)(a) of the RJAT).

19. The parties have legal personality and capacity and are duly represented.

20. The proceedings are free from nullities and no exceptions were raised, and it is possible to proceed to the decision on the merits of the case.

3 REASONING

3.1 Facts Established as Proven

21. Based on the documents brought before the tribunal, the following facts relevant to the decision of the case sub judice are established as proven:

a) On 20 December 2017, the Claimant, in representation of the Fund, acquired, by public deed of purchase and sale, the urban property with matriculation article ... and the rural property with matriculation article ..., section D, both located in the parish of ..., municipality of ... (Algarve), in consideration of payment of prices of, respectively, €380,000.00 and €10,000.00 - see Document 4;

b) IMT assessment number ... was issued, in the amount of €19,864.75, and the corresponding payment was made in full and on time - see Document 5.

3.2 Facts Not Established as Proven

22. With relevance to the decision on the merits there are no alleged facts that should be considered as not proven.

3.3 Grounds for Decision

23. With regard to the factual matter, the Tribunal does not need to pronounce on everything that was alleged by the parties, it being its responsibility to select the facts that matter for the decision and to distinguish between proven facts and unproven matters (cf. Article 123(2) of the Portuguese Tax Procedure Code (CPPT) and Article 607(3) of the Portuguese Civil Procedure Code (CPC), applicable by virtue of Article 29(1)(a) and (e) of the RJAT).

24. The facts pertinent to the judgment of the case are chosen and defined according to their legal relevance, which is established in light of the various plausible solutions to the questions at issue in the dispute (see Article 596(1) of the CPC, by virtue of Article 29(1)(e) of the RJAT).

25. Thus, the facts listed above were considered proven, with relevance to the decision.

3.4 Question to be Decided

26. The question to be decided relates to whether the exemption provided for in Article 1 of Decree-Law No. 1/87, of 3 January, was still in force at the time of the relevant facts. The answer to this could be given with a single sentence, concluding the reasoning there. In any case, at least a brief overview is required. The Fund represented here is a closed real estate investment fund, whose activity is currently regulated in accordance with the provisions of the General Framework of Collective Investment Undertakings, approved by Law No. 16/2015, of 24 February.

27. The legal regulation of real estate investment funds has been subject to successive legislative amendments, given the specificity of the activity in question; Decree-Law No. 246/85, of 12 July, disciplined the activity of investment funds, thereby recognizing the important contribution of these entities to the formation of savings, to the mobilization of investments in the real estate sector and to the promotion of the construction industry and the rental market.

28. The relevance assumed by the economic activity developed by these investment funds led to the establishment of the rules and conditions applicable to their creation and operation, namely in the field of taxation. It was in this context that Decree-Law No. 1/87, of 3 January, was approved, creating a set of tax incentives for the constitution of these investment funds.

29. In its Article 1, it was provided that:

"acquisitions of immovable assets made for a real estate investment fund by the respective managing company are exempt from Stamp Duty on Real Property (SISA)."

30. It thus followed that acquisitions of properties carried out by a managing company in representation of the funds would be exempt from SISA, that is to say, with a view to the integration of the properties into the assets of the investment funds administered and legally represented by it.

31. At that time the Code of Stamp Duty on Real Property and Tax on Inheritances and Gifts, approved by Decree-Law No. 41969, of 24 November 1958, established that Stamp Duty on Real Property was levied "on onerous transfers of the right of ownership or divisible figures of that right, on immovable property."

32. In the meantime, Decree-Law No. 287/2003, of 12 November, which carried out a reform of property taxation, expressly repealed the Code of Municipal Stamp Duty on Real Property and the Tax on Inheritances and Gifts - extinguishing these taxes. At the same time, it approved the IMT Code and the Code of Municipal Tax on Real Property ("IMI").

33. This statute expressly provided in Article 28(2) under the heading "Cross-References," that:

"All legal texts that mention the Code of Municipal Stamp Duty on Real Property and Tax on Inheritances and Gifts, municipal stamp duty on real property or tax on inheritances and gifts are to be read as referring to the Code of Municipal Tax on Onerous Transfer of Real Property (CIMT), the Stamp Tax Code, the municipal tax on onerous transfers of real property (IMT) and the stamp tax, respectively."

34. There it is also stated:

"[t]ax benefits relating to municipal property tax, now reported to IMI, are maintained in force, as well as those relating to municipal stamp duty on real property established in extraordinary legislation, to the Code approved by Decree-Law No. 41969, of 24 November 1958, and in the Tax Benefits Statute, which are now to be reported to IMT, are maintained in force."

35. Through the joint application of the normative provisions cited above, it is evident that it was the express intention of the legislator that exemptions applicable to the extinct Municipal Stamp Duty on Real Property and established in extraordinary legislation should continue to apply in the case of IMT. Now, Decree-Law No. 1/87, of 3 January, precisely falls within the category of extraordinary legislation to which that provision refers.

36. It is thus understandable why the conclusion is inevitable that the SISA exemption provided for in Article 1 of Decree-Law No. 1/87, of 3 January, came to apply to IMT. The relevant normative data allow us to sustain, objectively, the legislator's intention to maintain that tax benefit -- the SISA exemption -- in force for IMT. The question is only whether the same remained in force at the time of the relevant facts.

37. This will be the case if its elimination from the legal order did not occur. If that is the case, one must conclude that the operations of acquisition of immovable assets carried out by a managing company of a real estate investment fund with the intention that they become part of that fund's assets remain exempt from IMT, and there should be no assessment of this tax in the context of the same.

38. Article 7 of the Civil Code which deals with "Cessation of Legal Effect" provides:

"1. When a law is not intended to have temporary effect, it only ceases to be in force if it is repealed by another law.

2. Repeal may result from an express declaration, from incompatibility between the new provisions and the previous rules, or from the fact that the new law regulates all of the subject matter of the previous law.

3. General law does not repeal special law, except if the legislator's unequivocal intention is otherwise.

4. The repeal of the repealing law does not bring about the rebirth of the law it had repealed."

39. From this provision it results that, if a certain rule is not assigned temporary effect, it will be in force, with all its effects, as long as no other rule emerges to repeal it, expressly or implicitly. We can say, figuratively, that Article 7(1) is little more than the application of Isaac Newton's first law of motion to legal rules. Just as a body continues in its state of rest or uniform motion in a straight line, unless it is forced to change that state by forces applied to it, so too a law will continue in force in a given legal order, unless it is repealed by another law.

40. If after approving a legal rule such as Article 1 of Decree-Law No. 1/87, of 3 January, the State says or does nothing -- the law of inertia -- that rule will continue its validity in the legal order. This aspect is of decisive importance in the specific case, having legal significance within the scope of the principle of legal certainty and protection of citizens' confidence.

41. However, Article 319 of Law No. 71/2018, the State Budget Law for 2019 (SBL 2019), expressly repealed Article 1 of Decree-Law No. 1/87, of 3 January. This reflects the legislator's recognition that it was in force until that date, and was therefore in force at the date to which the facts refer. This fact allows us to conclude without doubt in favor of the Claimant's claim, as the AT will also have recognized by abstaining from responding.

42. Although Article 319 of the SBL 2019 makes unnecessary a review of the entire history of litigation over the validity of Article 1 of Decree-Law No. 1/87, of 3 January, of the arguments then considered and of the tedious discussion about the relevance for this purpose of Articles 46 and 49 of the Tax Benefits Statute, it would always demonstrate that even before the SBL 2019 it was generally accepted, by arbitral jurisprudence, the validity of the exemption in question, since a) it could not be inferred from its wording, or from the wording of any other subsequent rule, that that rule was intended to have temporary effect, and b) there had been no instance in which the legislator's intention to repeal the tax benefit under analysis, expressly or implicitly, had been verified.

3.5. Request for Restitution of Sums Paid and Compensatory Interest

43. The Claimant requests the restitution of sums collected by the Tax and Customs Authority, as well as payment of compensatory interest. Pursuant to Article 24(b) of the RJAT, the arbitral decision on the merits of the claim, which is not subject to appeal or challenge, binds the AT from the expiration of the period provided for appeal or challenge, and the AT must, in the exact terms of the acceptance of the arbitral decision in favor of the taxpayer and until the expiration of the period provided for voluntary execution of judgments of the tax courts, "re-establish the situation that would exist if the tax act which is the subject of the arbitral decision had not been carried out, adopting the acts and operations necessary for this purpose," in accordance with Article 100 of the General Tax Law (LGT) [applicable by virtue of Article 29(1)(a) of the RJAT], which establishes that "the tax administration is obliged, in case of full or partial acceptance of an administrative appeal, judicial challenge or appeal in favor of the taxpayer, to the immediate and full restoration of the legality of the act or situation which is the subject of the dispute, including payment of compensatory interest, if applicable, from the expiration of the period for execution of the decision."

44. Although Article 2(1)(a) and (b) of the RJAT uses the expression "declaration of illegality" to define the competence of arbitral tribunals operating in CAAD, making no reference to condemnatory decisions, it has long been understood that the competencies of these tribunals include the powers that in judicial challenge proceedings are conferred on the tax courts, and this is the interpretation that accords with the meaning of the legislative authorization on which the Government based itself to approve the RJAT, in which it is proclaimed, as the first guideline, that "the tax arbitration process must constitute an alternative procedural means to the judicial challenge process and the action for the recognition of a right or legitimate interest in tax matters."

45. Although it is, essentially, a process of annulment of tax acts, the challenge proceedings admit the condemnation of the Tax Administration to pay compensatory interest, as can be inferred from Article 43(1) of the LGT, which establishes that "compensatory interest is due when it is determined, in an administrative appeal or judicial challenge, that there was error attributable to the services resulting in payment of the tax debt in an amount greater than that legally due" and from Article 61(4) of the CPPT (in the wording given by Law No. 55-A/2010, of 31 December, to which corresponds Article 61(2) in the original wording), which states that "if the decision recognizing the right to compensatory interest is judicial, the period for payment runs from the beginning of the period for its voluntary execution."

46. Thus, Article 24(5) of the RJAT, by stating that "payment of interest, regardless of its nature, is due in accordance with the terms provided for in the general tax law and in the Tax Procedure and Process Code," should be understood as allowing for the recognition of the right to compensatory interest in the arbitral process. This understanding stems from the principle of effective judicial protection and the corresponding broadening of the powers that shape administrative and tax jurisdiction. Therefore, the Claimant has the right to be reimbursed for the tax paid plus compensatory interest by virtue of the aforementioned Articles 24(1)(b) of the RJAT and 100 of the LGT, since this is essential to "re-establish the situation that would exist if the tax act which is the subject of the arbitral decision had not been carried out."

47. In the case at hand, the illegality of the assessment and the dismissal of the Administrative Appeal, referring to the tax assessment for IMT identified above, results from the AT's erroneous understanding that the Claimant could not benefit from the IMT exemption established in Article 1 of Decree-Law No. 1/87, of 3 January, by virtue of the same having been implicitly repealed, which was manifestly not the case.

4 DECISION

By these terms, this Arbitral Tribunal decides:

1. To declare the illegality of the decisions dismissing the administrative appeal, issued by AT, in the context of proceedings numbered ...2018... and ...2018... and, consequently, of the tax assessment for IMT numbered ..., issued by AT, in the total amount of €19,864.75, with full restitution of the assessed tax, plus the corresponding compensatory interest.

2. To hold the request for restitution to the Claimant of the assessed tax in the amount of €19,864.75, corresponding to assessment number ..., as well as the request for compensatory interest thereon calculated at the legal rate, from the date of payment until the issue of the respective credit note, to be well-founded.

5 VALUE OF THE PROCEEDINGS

The value of the proceedings is fixed at €19,864.75, in accordance with Article 306(1) of the CPC and Article 97-A(1)(a) of the Tax Procedure and Process Code, applicable by virtue of Articles 29(1)(a) and (b) of the RJAT and Article 3(2) of the Regulation of Costs in Tax Arbitration Proceedings.

6 COSTS

The arbitration fee to be borne by the Respondent is fixed at €1,224.00 in accordance with Articles 12(2) and 22(4), both of the RJAT, and Article 4(4) of the Regulation of Costs in Tax Arbitration Proceedings and Table I attached thereto.

Let notice be given.

Lisbon, 6 May 2019

The Arbitrator

Jónatas Machado

Frequently Asked Questions

Automatically Created

Are closed real estate investment funds exempt from IMT (property transfer tax) in Portugal?
Yes, closed real estate investment funds can be exempt from IMT under certain conditions. Decree-Law 1/87 of January 3, 1987, originally provided SISA (predecessor to IMT) exemptions for property acquisitions made by management companies on behalf of real estate investment funds. The legal debate centers on whether this exemption regime survived the 2003 transition from SISA to IMT through the conversion provisions in Article 31(6) of Decree-Law 287/2003. Additionally, Article 46 of the Tax Benefits Statute provides separate IMT exemptions for properties already included in qualifying investment funds, pension funds, and retirement savings funds, though this provision addresses properties already in fund portfolios rather than acquisition transactions.
What is Decree-Law 1/87 and how does it apply to IMT exemptions for investment funds?
Decree-Law 1/87 of January 3, 1987, established tax incentives to promote real estate investment funds in Portugal, including exemption from SISA (Municipal Stamp Duty on Real Property) for property acquisitions made by fund management companies. When SISA was replaced by IMT in 2003 through Decree-Law 287/2003, Article 28(2) provided for automatic conversion of SISA references to IMT, and Article 31(6) maintained tax benefits from extraordinary legislation. The claimant argues this exemption remains valid today because no explicit repeal occurred, while the Tax Authority appears to have administratively ceased applying it. The interpretation of whether Decree-Law 1/87 survived legislative reforms is central to determining IMT liability for fund property acquisitions.
Can a fund management company file a CAAD arbitration claim on behalf of a closed investment fund?
Yes, a fund management company can file CAAD arbitration claims on behalf of a closed real estate investment fund it manages. Article 2(1)(a) and Articles 10(1) and 10(2) of Decree-Law 10/2011 (the Legal Framework of Arbitration in Tax Matters - RJAT) establish the procedural capacity for such representative claims. In this case, A... S.A., as the management company, successfully initiated arbitration proceedings in representation of the closed real estate investment fund, which was accepted by the CAAD President. The fund management company acts in its representative capacity but identifies both itself and the fund it represents in the arbitration request.
What happens when the Portuguese Tax Authority (AT) does not respond to an arbitration claim at CAAD?
When the Portuguese Tax Authority (AT) does not respond to a CAAD arbitration claim, the proceedings continue without the AT's defense. Under Article 17 of the RJAT (Legal Framework of Arbitration in Tax Matters), the AT is notified to present a response, but failure to do so does not halt the arbitration. In this case, the AT notified on March 19, 2019, that it would not submit a response. The arbitrator proceeds to decide the case based on the claimant's arguments, the administrative file, and applicable law. The AT's silence does not constitute an admission, but the tribunal evaluates the legal merits without benefit of the tax authority's counterarguments, potentially strengthening the taxpayer's position if their legal reasoning is sound.
How can taxpayers claim refund of IMT with compensatory interest after a successful CAAD arbitration decision?
After a successful CAAD arbitration decision ordering IMT cancellation, taxpayers are entitled to full restitution of the assessed tax plus compensatory interest (juros indemnizatórios). The compensatory interest rate is established by Ministerial Order and compensates taxpayers for the State's use of funds that were improperly collected. The Tax Authority must comply with the arbitral decision, which has the same effects as a final court judgment. Reimbursement typically occurs through the tax authority's refund procedures once the decision becomes final. If the 10-day appeal period expires without appeal by the AT, or if any appeal is unsuccessful, the taxpayer receives both the principal amount (€19,864.75 in this case) and calculated compensatory interest from the payment date until actual reimbursement. Taxpayers should monitor compliance timelines and may need to request execution if the AT delays.