Summary
Full Decision
ARBITRAL DECISION
Claimant: A… – INVESTMENT FUND MANAGEMENT COMPANY, SA
Respondent: Tax and Customs Authority (AT)
I – REPORT
A) The Parties and the Constitution of the Arbitral Tribunal
A… – INVESTMENT FUND MANAGEMENT COMPANY, SA, with registered office at Avenue …, no. … -… …-… Lisbon, tax identification number …, hereinafter referred to as "Claimant", filed a request for the constitution of a collective Arbitral Tribunal, under the terms of article 2, no. 1, paragraph a) of Decree-Law no. 10/2011, of January 20, hereinafter referred to as "RJAT" and of Ordinance no. 112 – A/2011, of March 22, for the challenge and declaration of illegality of two tax assessments, respectively, for IMT and IS, attached to the case file as document number 1.
The following tax acts are at issue:
- Assessment of IMT no. …, in the amount of €20,164.75;
and
- Assessment of IS no. …, in the amount of €3,120.00, both referring to Property U – …-ES located at Avenue …,…, Block …, … Apt., registered in the urban property register of the Parish of ... and ....
The request for constitution of the Arbitral Tribunal was presented by the Claimant on November 27, 2015, was immediately accepted by the Honorable President of CAAD and notified to the Tax and Customs Authority, pursuant to the legally foreseen terms and effects. The Claimant chose not to appoint an arbitrator, whereby, under the terms of article 6, no. 1 of RJAT, the undersigned was appointed by the Deontological Council of the Center for Administrative Arbitration on January 21, 2016, as arbitrator to form part of the Singular Arbitral Tribunal.
Thus, in conformity with the precepts in paragraph c), no. 1 of article 11 of RJAT, with the wording introduced by article 228 of Law no. 66-B/2012, of December 31, the Singular Arbitral Tribunal was constituted on February 5, 2016. On February 12, 2016, an arbitral order was issued to the Tax and Customs Authority (ATA) to present its response within the legal deadline, pursuant to the terms and effects of the provisions in nos. 1 and 2 of article 17 of RJAT.
On March 15, 2016, the Respondent presented its response to the case file, which is hereby considered fully reproduced. Simultaneously, it presented a motion requesting exemption from holding the meeting provided for in article 18 of RJAT, since the matter at issue is exclusively one of law, with no evidence to be produced, whereby it requested that the proceedings continue to arguments and final decision. On March 17, 2016, an arbitral order was issued to the Claimant to pronounce itself regarding the possibility of exemption from holding the aforesaid meeting. On March 21, 2016, the Claimant pronounced itself through a motion filed with the case stating its agreement with the exemption from holding the meeting and continuation of the proceedings to written arguments and final decision.
In this conformity, the arbitral tribunal issued, on March 22, 2016, an order exempting the holding of the meeting provided for in article 18 of RJAT, in which it set a 15-day period for the parties, if they wish, to present written arguments and determined the date of May 10, 2016 for issuance of the arbitral decision, with the Claimant being required to pay the subsequent arbitral fee by this date. By arbitral order of May 9, 2016, the arbitral tribunal extended by a further thirty days the deadline for issuing the arbitral decision, given that the previously set deadline was very close to the time limit for the parties to present their arguments.
The parties presented their respective arguments on April 22, 2016, and the Respondent attached a document with the arbitral decision issued in case 688/2015-T, whose factual and legal matters are very similar to those of the present case, although it has not yet become final.
B) THE CLAIM FORMULATED BY THE CLAIMANT:
The Claimant formulates the present request for arbitral pronouncement, seeking that the Arbitral Tribunal annul the assessments described above, on the grounds that they suffer from unconstitutionality, since they are based on article 236 (Transitional Norm within the framework of the Special Regime Applicable to FIIAH and SIIAH) provided by Law no. 83 – C/2013, of December 31 - insofar as it determines the application of the current Tax Regime for FIIAH "to properties that were acquired by FIIAH before January 1, 2014, counting, in such cases, the three-year period provided for in no. 14 from January 1, 2014" - constitutes a new regime for the expiration of exemptions provided for in no. 7, paragraph a) and no. 8 of article 8 (Tax Regime) of the Tax Regime for FIIAH, revealing a flagrant and unequivocal violation of the principle of non-retroactivity of tax law, enshrined in article 103 (Tax System), no. 3 of the Constitution of the Portuguese Republic. The Claimant understands that the violation of this constitutional principle, which constitutes a fundamental guarantee of taxpayers (fundamental right), generates nullity.
The Claimant understands that at the moment when the property in question entered the Fund's patrimony, the exemption in IMT and Stamp Tax (IS) became definitively crystallized in the legal order, being that at the date of entry into the Fund the exemption was not conditioned to the verification of any fact or circumstance, nor was it subject to any regime of expiration. Being thus, the subsequent imposition of these facts or circumstances to exemptions crystallized in the Claimant's legal sphere suffers from unconstitutionality by violation of the non-retroactivity of tax law. Authentic retroactivity, insofar as the tax facts that the new law seeks to regulate have already produced all their effects under the old law.
However, without conceding and merely as a precaution of representation, the Claimant understands that the assessments would necessarily have to be annulled due to a defect of illegality, generating voidability.
These are, in summary, the arguments that the Claimant invokes in its claim and which it reinforces in the arguments presented to the case file, which are hereby considered fully reproduced.
In summary, the Claimant petitions for the nullity of the assessments based on their unconstitutionality and, subsidiarily, should this not be understood, the annulment of the assessments due to illegality. It further requests the reimbursement of the total tax assessed and paid and the indemnificatory interest that may be due until the date of such reimbursement.
C – THE RESPONSE OF THE RESPONDENT
The Respondent AT, duly notified for this purpose, presented its response in a timely manner in which, by way of opposition, it alleged, in summary, the following:
The tax acts in question did not violate any legal or constitutional precept, and should therefore be maintained;
The impossibility of AT disapplying the legal norm in question, on the grounds of its unconstitutionality, since it is subject to the principle of legality, as results from the provisions of articles 266, no. 2 of the CRP, 3 no. 1 of the CPA and 55 of the LGT. This issue is duly addressed and treated by legal doctrine and the case law of the superior courts. It also invokes, in defense of this understanding, various Opinions of the Attorney General's Office. Thus, the legal provision of paragraph d) of no. 2 of article 133 of the CPA is only extensible to the violation of rights, freedoms and guarantees of Title II of Part I of the CRP.
Notwithstanding, AT understands that the transitional norm contained in the aforementioned article 236 of Law 83 C/2013 of December 31 does not suffer from unconstitutionality.
It further understands that the reference to the underlying regime in article 204, no. 1, paragraph a) of CPPT is manifestly decontextualized, and does not result therefrom any understanding coinciding with the thesis of nullity defended by the Claimant. It is the settled understanding of the case law of our superior courts that, should the defect attributed to the assessments in question exist, it would never generate nullity, but only voidability.
But neither does this defect exist, because according to AT, there is no violation of article 103, no. 3 of the CRP, especially since always, that is, since the beginning of the tax regime applicable to FIIAH, that fulfilling the prerequisite that such properties be intended exclusively for rental for permanent housing. They were always conditioned to this prerequisite, whereby the Law 83-C/2013, of December 31, merely served to clarify the criterion already required. It develops abundant argumentation around the regime applicable to tax benefits and the verification or supervision of the conditions that determined it. Whereby it may always cease, through supervision that concludes the non-verification of the respective prerequisites.
It concludes for the legality of the assessments and the lack of merit of the request for annulment and conviction for the payment of indemnificatory interest.
II - PROCEDURAL REQUIREMENTS
The Arbitral Tribunal is regularly constituted. It is materially competent, pursuant to article 2, no. 1, paragraph a) of RJAT.
The Parties enjoy legal standing and capacity, are legitimate and are duly represented (see articles 4 and 10 no. 2 of RJAT and article 1 of Ordinance no. 112/2011, of March 22).
The proceedings do not suffer from defects that would invalidate it.
Taking into account the documentary evidence attached to the case file, and the allegations made by the parties, it is necessary to establish the facts relevant for understanding the decision, which is established as follows.
III – Statement of Facts
A) Established Facts
As relevant facts, the present tribunal finds the following facts to be established:
a) The Claimant company, designated A… – Investment Fund Management Company, SA is a manager of the B… investment fund - CLOSED REAL ESTATE INVESTMENT FUND FOR RESIDENTIAL RENTAL, registered with the Securities Market Commission, with the tax number ….
b) In the scope of its activity, the Claimant disposed of on September 18, 2015, the real property, owned by this investment fund, located at Avenue …, …, Block …, … Apt., in the Parish of ... and ..., designated in the urban property register as property U-…-ES;
c) Prior to the execution of the public deed of disposition, the Claimant requested from the Respondent the issuance of the respective IMT and IS assessments, namely:
i. Assessment of Municipal Tax on Onerous Property Transfer (IMT) no. …, in the amount of € 20,164.75;
ii. Assessment of Stamp Tax (IS) no. …, in the amount of €3,120.00.
d) The tax assessments supra identified are dated September 18, 2015, with payment deadline until September 21, 2015, and the Claimant made its payment within the legal deadline, concretely on September 21, 2016, as results from documents nos. 1 and 2 attached to the arbitral request.
B) UNESTABLISHED FACTS
With relevance for the decision, there are no relevant facts for the decision that should be considered as unestablished.
C) JUSTIFICATION OF ESTABLISHED FACTS
The facts supra described were established based on the documentary evidence that the Claimant attached to the case file, confirmed by AT, which attests as true the facts supra listed.
Thus, taking into consideration the positions assumed by the parties and the documentary evidence attached to the case file, the facts listed above were considered established, with relevance for the decision, which are moreover consensually recognized and accepted by the parties.
IV – ON THE LAW: justification of the merit decision
- Having established, as stated above, the statement of facts, it is necessary to address the legal question raised by the Claimant, which consists of determining whether the IMT and IS assessments subject to the request for arbitral pronouncement suffer from the alleged illegalities.
It is necessary to decide.
As we have seen above, the Claimant bases its claim on the alleged unconstitutionality of article 236 of Law no. 83-C/2013 of December 31.
Within the scope of the competence assigned to this arbitral tribunal, delimited in article 2 of RJAT, it falls to appreciate the legality or illegality of the tax acts challenged, as the question is delimited by the Claimant in its claim.
The Claimant alleges that by virtue of the alleged unconstitutionality of article 236 of Law 83-C/2013 in its response, AT should not have assessed the taxes in question. It further alleges violation of the principle of non-retroactivity, which constitutes violation of a fundamental right, generating nullity of the assessment act.
The Respondent, on the other hand, understands that this argument does not hold because, in the exercise of its functions, it is obligated to comply with the law and the law, having no competence to decide on the non-application of norms with respect to which doubts are raised about their conformity with the Constitution. To which is added, in the view of AT, that there is no violation of the principle of non-retroactivity, having the assessments originated in the fact that the destination given to the properties (disposition) was not rental for housing, the prerequisite on which the tax benefit granted was based.
On the question of the alleged unconstitutionality, the case law of the superior courts has been quite unanimous in recognizing that the Administration is subject to the principle of legality and, therefore, cannot disapply a certain legal norm on the grounds of unconstitutionality. In a recent decision, the Supreme Administrative Court pronounced itself on this question, in the following terms:
"(…) unless it is a matter of disrespect for constitutional norms directly applicable and binding, such as those referring to rights, freedoms and guarantees (see article 18, no. 1 of the CRP), AT cannot refuse to apply the norm on the grounds of unconstitutionality (On the question, see the opinions of the Consultative Council of the Attorney General's Office referred to in the Collection of Opinions of the Attorney General's Office, volume V, points 10, 3, 3.2 – respectively, with the headings "Supervision of constitutionality", "Successive supervision" and "(In)application of an unconstitutional norm (powers and duties of the Public Administration)" –, whose doctrine we follow.). For the Administration in general is subject to the principle of legality, enshrined constitutionally and AT is so by virtue of the provision in article 55 of the LGT. In our view, AT should await the declaration of unconstitutionality with binding general force, to be issued by the Constitutional Court (TC), pursuant to article 281 of the CRP. For, as VIEIRA DE ANDRADE says, "This conflict [between constitutionality and the principle of legality] cannot be resolved through the automatic prevalence of constitutional law over legal law. That is not what is at issue, because what is in question is not the constitutionality of the law, but the judgment that administrative bodies may make about that constitutionality. On the one hand, the Administration is not an organ for supervision of constitutionality; on the other hand, the submission of the Administration to the law is aimed not only at the protection of the rights of individuals, but also at the defense and pursuit of public interests […]. The granting to administrative power of unlimited powers to control the unconstitutionality of the laws to apply would lead to administrative anarchy, would invert the Law-Administration relationship and would directly attack the principle of separation of powers, as established in our Constitution" (Constitutional Law, Almedina, 1977, p. 270.). In the same sense, JOÃO CAUPERS states that "the Administration does not, in principle, have competence to decide the non-application of norms whose constitutionality raises doubts in it, unlike the courts, to whom falls the supervision of diffuse and concrete conformity constitutional, as demonstrated by the differences between articles 207 [now, 204] and 266, no. 2, of the Constitution. While the former prevents courts from applying unconstitutional norms, the latter stipulates the subordination of administrative organs and agents to the Constitution and the law.
It appears clear that the essential difference between the two precepts results precisely from the circumstance that it was not intended to entrust the Administration with the task of supervision of the constitutionality of the laws. The performance of such a function by the latter must be seen as exceptional" (Fundamental Rights of Workers and the Constitution, Almedina, 1985, p. 157.).
We conclude, therefore, that in Portuguese Constitutional Law there is no possibility for the Administration to refuse to obey a norm that it considers unconstitutional, substituting itself for the organs of supervision of constitutionality, unless it is a matter of violation of constitutionally enshrined rights, freedoms and guarantees, which is manifestly not the case when it is a matter of the application of a norm potentially violating the principle of non-retroactivity of tax law…", see, among others, the recent judgments dated February 26, 2014, appeal no. 0481/13 and March 12, 2014, appeal no. 01916/13." [1]
On this point, the allegation of the Respondent proceeds when it invokes its submission to the law and, by force thereof, the impossibility of disapplying a norm in function of the interpretation it makes regarding its unconstitutionality.
Moreover, this Tribunal understands that it does not have to pronounce itself on the alleged unconstitutionality of article 236 of Law 83-C/2013 of December 31 (2014 Budget Law), for not having competence to do so, but rather on the invoked illegalities of the tax acts challenged, even though sustained in the concrete application of the norm in question. Thus, the arbitral tribunal understands to pronounce itself on the concrete application of the legal regime in question, to assess the legality or illegality of the assessments challenged, a matter that falls within the scope of its competence.
Given this, it falls to appreciate the remaining legal questions raised in the case file and which relate to the legal regime applicable to real estate investment funds for residential rental (FIIAH) and real estate investment companies for residential rental (SIIAH), and the prerequisites of the tax benefits granted.
The regime applicable to real estate investment funds for residential rental (hereinafter "FIIAH") and real estate investment companies for residential rental was established by Law no. 64-A/2008, of December 31 (2009 Budget Law), which in its article 8 established the tax regime applicable to FIIAH.
With respect to the Municipal Tax on Onerous Property Transfer (IMT), the Tax Regime for FIIAH defined, in number 7 of the aforementioned article 8, the following:
Article 8
(Tax regime)
(…)
"7 – The following are exempt from IMT:
a) Acquisitions of urban properties or autonomous units of urban properties intended exclusively for rental for permanent housing by the investment funds referred to in no. 1;
b) Acquisitions of urban properties or autonomous units of urban properties intended for permanent own housing, as a result of the exercise of the purchase option referred to in no. 3 of article 5 by tenants of properties that form part of the patrimony of the investment funds referred to in no. 1."
Law no. 83-C/2013, of December 31 (2014 Budget Law) added to this article 8 numbers 14 to 16, which provide the following:
"14 - For the purposes of the provisions in nos. 6 to 8, urban properties are considered to be intended for rental for permanent housing whenever they are subject to a rental contract for permanent housing within a three-year period counted from the moment they entered the fund's patrimony, with the taxpayer required to communicate and provide proof to AT of the respective actual rental within 30 days following the end of said period.
15 - When properties have not been subject to a rental contract within the three-year period provided for in the previous number, the exemptions provided for in nos. 6 to 8 cease to have effect, in which case the taxpayer must request from AT, within 30 days following the end of said period, the assessment of the respective tax.
16 - Should the properties be disposed of, with the exception of the cases provided for in article 5, or should the FIIAH be subject to liquidation, before the expiration of the period provided for in no. 14, the taxpayer must likewise request from AT, prior to the disposition of the property or the liquidation of the FIIAH, the assessment of the tax due pursuant to the previous number."
Law no. 83-C/2013, of December 31 (2014 Budget Law) further enshrined in its article 236 a transitional regime within the framework of the special regime applicable to FIIAH and SIIAH the following transitional regime:
"1 - The provisions in 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 December 31, applies to properties that have been acquired by FIIAH from January 1, 2014.
2 - Without prejudice to what is provided for in the previous number, the provisions in 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 December 31, equally applies to properties that have been acquired by FIIAH before January 1, 2014, counting, in such cases, the three-year period provided for in no. 14 from January 1, 2014."
The special regime applicable to FIIAH and SIIAH, contained in Law no. 64-A/2008 of December 31 (2009 Budget Law) which approved the special regime applicable to these funds and real estate investment companies, provided that this regime "applies to FIIAH or SIIAH constituted during the five years following the entry into force of the present law and to real property acquired by them in the same period", that is, between January 1 and December 31, 2013. The constitution and functioning of FIIAH are governed by the provisions in the Legal Regime of Real Estate Investment Funds, approved by Decree-Law no. 60/2002 of March 20.
Thus, it results from this special regime that borrowers of home credit contracts who proceed to dispose of the property subject to the contract to a FIIAH may enter into a rental contract with the fund management entity, with information about the essential elements of the transaction being provided prior to the execution of the property transfer contract to the FIIAH. It also results from this legal regime that the rental constitutes the tenant with a purchase option right of the property from the fund, capable of being exercised until December 31, 2020, which is only transferable by death of the holder.
It is thus clear that the legislator's objective with this regime was to provide alternative solutions for mortgage creditors, in times of acute economic crisis, incentivizing the disposition of properties and execution of rental contracts with purchase option at the end of the contract.
For this reason, the legislator granted some tax exemptions, namely:
the exemption from CIT, as for the income of FIIAH (of any nature) constituted between January 1, 2009 and December 31, 2013;
The exemption from PIT and CIT as for income relating to participation units;
Exemption from PIT on gains resulting from the transmission of properties intended for own permanent housing in favor of investment funds that occur by virtue of the conversion of the right of property of these properties into a rental contract;
Exemption from IMI on properties intended for rental for permanent housing, while they remain in the ownership of the FIIAH;
Exemption from IMT as for acquisitions of urban properties or autonomous units of urban properties intended exclusively for rental for permanent housing by the investment fund, as well as acquisitions by virtue of the exercise of the purchase option by tenants of properties that form part of the patrimony of the investment funds;
Exemption from Stamp Tax as for all acts carried out, provided that connected with the transmission of urban properties intended for permanent housing that occurs by virtue of the conversion of the right of property into the right of rental on the same properties, as well as the exercise of the purchase option provided for in the contract.
The above regime applies, with the necessary adaptations, to real estate investment companies that may be constituted under the special law and that observe what is provided for in the special regime applicable to FIIAH.
The above-mentioned exemptions configure and fall within the concept of tax benefits, pursuant to the provisions of the EBF, because they assume the nature of measures of exceptional character, instituted for the protection of relevant extrafiscal public interests and which are superior to those of taxation that prevent them. Tax benefits translate into facts which, being subject to taxation, are preventive of the birth of the tax obligation.
Given this, it appears clear that the special regime above described, created in 2008 to take effect from 2009, had a clear purpose of responding to a crisis situation, safeguarding the interests of families with difficulties in paying housing credit installments, incentivizing recourse to rental, with purchase option by the tenant, freeing the businesses inherent to the tax burden to which they would be subject in normal circumstances. For this reason, these special regimes may be granted for a determined period of time.
It is equally clear that the operability of the tax benefits provided for in this special regime remain conditioned to a prerequisite which is that the properties be subject to a rental contract for own permanent housing. Should it be verified that urban properties or units are or come to be intended for another purpose other than rental, then the above-mentioned tax benefits cannot be maintained. And, note it, this conclusion is imposed, not by application of the transitional norm of article 236 of the 2014 Budget Law, but because ab initio that was the legislator's design. Since the introduction of the legal regime for FIIAH in 2008, the legislator has conditioned the tax benefits enshrined on the fulfillment of the obligation to direct the properties to rental under the conditions mentioned above.
Being thus, whenever an urban property comes to have a destination different from rental for own permanent housing, then one of the prerequisites for the application of the tax benefit fails. In other words, what was subject to exemption may cease to be so and become subject to taxation, whenever the prerequisite(s) of the exemption legally provided for are not verified. Thus, if one of these urban properties comes to be disposed of or subject to another type of legal transaction different from that which is provided for in the law as exempt from taxation (rental for own permanent housing), it is to be concluded that the tax exemption granted ceases.
And it is further important to note that the nature of the taxes in question being characterized by single-obligation taxes in no way affects what is set forth.
With the 2014 Budget, numbers 14, 15 and 16 were added to article 8 (tax regime) of the regime applicable to FIIAH, with the following content:
"(…)14 – For the purposes of the provisions in nos. 6 to 8, urban properties are considered to be intended for rental for permanent housing whenever they are subject to a rental contract for permanent housing within a three-year period counted from the moment they entered the fund's patrimony, with the taxpayer required to communicate and provide proof to AT of the respective actual rental within 30 days following the end of said period.
15 - When properties have not been subject to a rental contract within the three-year period provided for in the previous number, the exemptions provided for in nos. 6 to 8 cease to have effect, in which case the taxpayer must request from AT within 30 days following the end of said period the assessment of the respective tax.
16 – Should the properties be disposed of, with the exception of the cases provided for in article 5, or should the FIIAH be subject to liquidation, before the expiration of the period provided for in no. 14, the taxpayer must likewise request from AT, prior to the disposition of the property or the liquidation of the tax due pursuant to the previous number."
The 2014 Budget Law further provides for a transitional norm, in its article 236, which is the basis of the present arbitral request, which establishes the following transitional regime:
"1 - The provisions in nos. 14 to 16 of article 8 of the special regime applicable to FIIAH and SIIAH (…) applies to properties that have been acquired by FIIAH from January 1, 2014
2 - Without prejudice to what is provided for in the previous number, the provisions in nos. 14 to 16 of article 8 of the special regime for FIIAH and SIIAH (…) equally applies to properties that have been acquired by FIIAH before January 1, 2014, counting, in such cases, the three-year period provided for in no. 14 from January 1, 2014."
With the above-mentioned norms, the legislator came to clarify some concepts underlying the special regime, which the 2008 law had not clarified in such explicit fashion and added the provision of a time limit to direct the property to the legally intended purpose.
Thus, it came to clarify the meaning of "urban properties intended exclusively for rental for permanent housing" (a concept that was not even innovative), as well as to specify the circumstances under which the benefits of tax exemption granted by the special regime cease. But, it is worth noting that, in light of the special regime provided for in article 8, in its original wording, the essential condition was already expressed and unequivocally enshrined for properties integrated into FIIAH and SIIAH to benefit from the exemptions, and which was precisely that which is currently provided for in the version introduced by the 2014 Budget Law: to have as purpose rental for permanent housing, with purchase option in favor of the tenant. Any other destination given to the properties in question, notably their disposition under circumstances different from those the law permits (exercise of the right of purchase option by the tenant) would always be subject to taxation in IMT and Stamp Tax.
In other words, the introduction of the above-described norms merely served to clarify some concepts, introduce a time limit for FIIAH and SIIAH to enter into rental contracts for permanent own housing, already previously presupposed as a condition to operate the tax benefits legally provided for in the special regime applicable. But they do not alter the substance of the legal regime in force.
In fact, it is not apparent that the introduction of these norms results in something truly innovative, that alters or calls into question the legitimate expectations of these investment funds, which were created specifically to solve a particular problem, related to the economic crisis that affected many families at risk of loss of their housing without any alternative solution. For this reason, the legislator created this special taxation regime in 2008 (2009 Budget Law) to prevent social and economic damage that would harm families and credit institutions, the former through the dramatic loss of their right to housing and the latter through the inability to recover their credits.
Pursuant to the norms introduced by the 2014 Budget Law, it also results that in the case of properties that form part of FIIAH and SIIAH not being subject to a rental contract within 3 years, counted from the date of their entry into the fund's patrimony, the exemptions provided for in IMI, IMT and Stamp Tax, lapse (cease to have effect) and constitute the taxpayer in the obligation to request from AT the assessment of the respective tax, within 30 days following the end of that period. From which it also results that, if the properties are disposed of before the three years they are obligatorily subject to the taxes owed, and if they are disposed of after the three years outside the legal framework provided for also. In the first as in the second case, the legal prerequisites on which the right to the tax benefits enshrined in the special regime applicable depend are not met. The only circumstance in which this will not occur is precisely that which is and has always been (since 2008) provided for in the law as a condition for the exemptions: the properties being subject to a rental contract for permanent housing, with purchase option by the tenant and coming to be disposed of in their favor by virtue of this option right.
Returning now to the analysis of the specific case at issue in the present proceedings, it remains to analyze the circumstances that determined the Assessments challenged.
The Claimant alleges that the changes introduced by Law no. 83-C/2013, of December 31 (2014 Budget Law) to the Tax Regime for FIIAH, raise legitimate perplexities and questions to the management companies of FIIAH that intend to comply with their obligations to AT. It further understands that the assessments challenged suffer from illegality by violation of the principle of non-retroactivity provided for in article 103, no. 3 of the CRP, given that at the date the properties entered the fund's patrimony, the exemptions of IMT and IS enshrined did not depend on the verification of any subsequent facts or circumstances, nor were they subject to any regime of expiration.
Now, being it true that the 2014 Budget Law came to introduce the above-described norms with the innovations already referred to, it does not appear that the reason underlying the assessments challenged results from any of the norms now introduced.
The truth is that the exemptions enshrined in this special regime have required, since their introduction in 2008, that the acquisition of properties have as exclusive purpose rental for permanent housing and that the transmission have for object properties intended for permanent housing. In other words, the taxpayers who sought to benefit from these exemptions would always have to comply with the legal prerequisite that required and requires that the properties be intended exclusively for rental for permanent housing.
In the case of the present proceedings, as results proven by the content of the documentary evidence presented, namely in the assessment notes attached to the arbitral request, the assessments challenged were based on the fact that the property was disposed of by the Claimant on September 18, 2015. The property, owned by this investment fund, located at Avenue …, …, Block …, … Apt., in the Parish of ... and ..., was disposed of on the stated date, whereby it did not fulfill the purpose provided for in the special regime, that is, rental for permanent housing.
Therefore, the assessments in question do not result from any requirement or prerequisite inserted ex novo by the 2014 Budget Law, but rather from the non-allocation of the property to the specific purpose provided for in the law as a potentiator of the tax exemptions granted.
Thus, if the Claimant decided to dispose of the property instead of allocating it to the specific purpose of rental for permanent housing, it well knew that it could not benefit from the exemptions of IMT and IS provided for in article 8, no. 7, paragraph b), no. 8 and article 5, no. 3 of the special regime for FIIAH. The disposition, whether by exchange, sale or any other legal transaction different from that resulting from the exercise of the right of purchase option arising from the rental contract for own permanent housing (the only situation capable of benefiting from the provided exemptions), would always be subject to taxation in IMT and Stamp Tax.
Tax benefits that the legislator provides when it understands that weighty reasons justify it, prevent taxation, but always conditioned to the verification of the legal requirements. They are by nature exceptional and by preventing taxation that would normally apply in normal circumstances to the tax facts in question, must be well considered and regulated in detail and balance, under penalty of permitting abusive exploitation contrary to the extrafiscal purpose they seek to achieve. [2]
For this reason, the legislator does not grant tax benefits without the imposition of requirements, conditions or prerequisites to which the taxpayer is obligated, under penalty of being subject to normal taxation provided for.
In the case of the legal regime under analysis, we are faced with a tax benefit that is conditioned, that is, the benefit depends on certain prerequisites provided for in the law being verified. [3]
By constituting derogations from the general taxation rules provided for in the law, tax benefits naturally raise questions regarding compliance with the imperatives arising from the principles of ability to pay and equality, whereby they must be considered in function of the purposes to be safeguarded. Their supporting foundation is the social, economic or other purpose it seeks to achieve. For this very reason it is never unconditional or granted without definition of well-defined facts and legal prerequisites in the law.
Whereby, should these prerequisites not be verified, the tax benefit cannot operate, whether it is automatic benefits or those dependent on recognition.
As results from the provisions of article 12 of the EBF "the right to tax benefits must be reported to the date of verification of the respective prerequisites, even if it is dependent on recognition". From this it is inferred that the rule is that the right to tax benefits is established with the verification of the respective prerequisites provided for in the law.
Indeed, in reinforcement of this understanding, article 5 of the EBF provides that tax benefits may be "automatic and dependent on recognition", the former being those resulting direct and immediately from the law while the latter presuppose one or more subsequent acts of recognition.
To this is further added that pursuant to article 65 of CPPT "the recognition of tax benefits depends on the initiative of the interested parties, through a request specifically directed to this end, the calculation, when mandatory, of the requested benefit and the proof of verification of the prerequisites for recognition pursuant to the law."
For the case analyzed in the present proceedings, the last part of this legal provision is particularly relevant, given that the right to the tax benefits in question depends exclusively on the proof of verification of the prerequisites provided for in the law.
Finally, pursuant to article 7 of the EBF "all persons, singular or collective, of public or private law, to whom tax benefits are granted, automatic or dependent on recognition are subject to supervision by the Tax and Customs Authority."
Given this, it is concluded that the 2014 Budget Law did indeed come to clarify and establish a new condition to the legal prerequisite previously provided for the right to the exemption, namely: if the allocation to rental for permanent housing does not occur within the three-year period following the entry of the property into the fund, the fund must request from AT the assessment of the IMT that was not assessed ab initio.
However, it was not the application of this deadline, introduced in the version of the 2014 Budget Law, that originated the assessments challenged. These were a consequence derived from the fact that a destination has been given to the urban property in question different from that which, since the introduction in the legal order of this special taxation regime (2008), was required as a prerequisite for the right to the exemption of IMT and IS.
As results proven by the content of the assessments challenged, the property was disposed of by exchange, and it was for this reason that the tax benefit lapsed, by non-fulfillment of the prerequisite for the right to the exemption.
In the arguments presented to the case file, the parties renew what they had already alleged previously, with the Claimant not alleging anything new on this crucial question for assessing the (i) legality of the assessments.
It results proven that the urban property in question did not have as purpose rental for permanent housing nor did the disposition that occurred (referenced in the assessment notes as exchange) occur by exercise of the right of purchase option by the tenant.
Now, as is demonstrated by all of what has been set forth, the issue is not the retroactivity or non-retroactivity of the 2014 Budget Law, nor does it appear that there exists any impairment of expectations of the Claimant or aggravation of its tax position, because it well knew that the prerequisite for the tax benefits of IMT and IS, established since the 2008 version, was that acquisitions of urban properties or autonomous units of urban properties be intended, exclusively, for rental for permanent housing. Finally, the new regime established by the transitional norm contained in article 236 of the 2014 Budget Law has no causal relationship with the reason for the assessments in question, with the norms introduced not altering the requirements for the exemption established by the special taxation regime applicable to SIIAH and FIIAH, in force since January 1, 2009.
In this conformity, this Tribunal understands that the assessments of IMT and Stamp Tax, challenged in the present proceedings, appear to be legal, for being conformable with the provisions of article 8, no. 7, paragraph a) of the legal regime for FIIAH.
Being thus, the present arbitral request is considered to lack merit.
As to the request for indemnificatory interest:
- Given the lack of merit of the arbitral request, the remaining requests also lack merit, namely the request for reimbursement of the amounts paid, as well as the request for indemnificatory interest.
V - DECISION
For these reasons, it is decided:
a) To find the arbitral request completely without merit and, in consequence, to uphold the tax acts challenged and to absolve the Respondent of all requests made;
b) To condemn the Claimant to the costs of the proceedings, in the amount of €1,224.00.
VALUE OF THE PROCEEDINGS:
The value of the proceedings is set at €23,284.75 pursuant to article 97-A, no. 1, a), of CPPT, applicable by virtue of paragraphs a) and b) of no. 1 of article 29 of RJAT and of no. 2 of article 3 of the Regulations of Costs in Tax Arbitration Proceedings.
COSTS:
The value of the arbitral costs is set at €1,224.00, pursuant to Table I of the Regulations of Costs in Tax Arbitration Proceedings, to be paid by the Claimant, pursuant to articles 12, no. 2, and 22, no. 4, both of RJAT, and article 4, no. 4, of the said Regulations.
Notify.
Lisbon, June 2, 2016
The Singular Arbitral Tribunal,
(Maria do Rosário Anjos)
[1] See Judgment of STA of January 21, 2015, in case 0703/2014, available at www.dgsi.pt.
[2] As Benjamim da Silva Rodrigues refers to this on this matter, in Guarantees of Taxpayers in the Tax System, Tribute to Diogo Leite de Campos, Editor Saraiva, 2013, S. Paulo, Brazil, pp. 55 et seq.: "notwithstanding that they are "measures of exceptional character instituted for the protection of relevant extrafiscal public interests that are superior to taxation that prevent them", the referred tax benefits paralyze, to some extent, the legal generative potentiality of the tax fact."
[3] In this sense, according to Alberto Xavier, in Tax Law, Manuals of FDL, "conditioned benefits translate into subordinating the right to the benefit to counterparts of public interest in the form of duties or burdens imposed on the beneficiaries."