Summary
Full Decision
Case No. 720/2014-T
The arbitrators Dr. Jorge Manuel Lopes de Sousa (arbitrator-president), Prof. Doctor João Sérgio Ribeiro and Dr. Jaime Carvalho Esteves, appointed by the Ethics Council of the Administrative Arbitration Centre to form the Arbitral Tribunal, constituted on 23-12-2014, agree as follows:
- Report
A..., SA., with registered office at …, n.º … – 6º C, …-… Lisbon, NIPC …, submitted a request for constitution of the collective arbitral tribunal, in accordance with the combined provisions of Articles 2.º and 10.º of Decree-Law No. 10/2011, of 20 January (Legal Framework for Arbitration in Tax Matters, hereinafter referred to only as LFATM), in which the Tax Authority is the respondent.
The request for constitution of the arbitral tribunal was accepted by the President of the CAAD and automatically notified to the Tax Authority on 05-12-2014.
Pursuant to the provisions of paragraph a) of paragraph 2 of Article 6.º and paragraph b) of paragraph 1 of Article 11.º of the LFATM, the Ethics Council appointed as Arbitrators the signatories, who communicated acceptance of the appointment within the applicable period.
On 05-12-2014, the Parties were notified of this appointment, having expressed no wish to challenge the appointment of the arbitrators, in accordance with the combined provisions of Article 11.º paragraph 1 letters a) and b) of the LFATM and Articles 6.º and 7.º of the Code of Ethics.
Thus, in accordance with the provisions of letter c) of paragraph 1 of Article 11.º of the LFATM, the collective arbitral tribunal was constituted on 23-12-2014.
The Applicant states that it was subject to external tax audit by the Tax Administration (TA) with reference to the fiscal year 2009, namely within the scope of the Municipal Tax on Onerous Transfer of Real Estate (IMT), resulting from the relevant Tax Inspection Report (TIR) corrections in this tax and Stamp Tax that entailed additional assessments on the grounds that lower IMT and Stamp Tax had been assessed than was due, within the scope of the merger process by absorption into the Applicant of REAL ESTATE COMPANY B…, SA, on 11-02-2009, whose real estate assets are detailed below and likewise the values of the aforementioned additional assessments:
Seeking to benefit from the conditions provided for in Decree-Law No. 151-A/2013, the Applicant timely requested from the Tax Administration the relevant payment slips, which occurred on 18-12-2013, and considers that the assessments suffer from illegality by violation of the rules of lapse and by erroneous quantification of the taxable values that gave rise to them, with violation of the principle of legality.
The Tax Authority presented a Reply in which it raised exceptions of lapse of the request for arbitral ruling and illegality of the cumulation of requests and defended itself by contesting, stating that the present arbitral action should be judged unsuccessful.
The Applicant replied in writing to the exceptions, arguing that they should be judged unsuccessful.
By order of 04-02-2015, the meeting provided for in Article 18.º of the LFATM was dispensed with and it was decided that the case would proceed with optional written submissions.
The Parties presented submissions.
The arbitral tribunal was regularly constituted and is materially competent, in accordance with the provisions of Articles 2.º, paragraph 1, letter a), and 30.º, paragraph 1, of the LFATM.
The parties have legal personality and capacity, are legitimate (Articles 4.º and 10.º, paragraph 2, of the same legislation and Article 1.º of Order No. 112-A/2011, of 22 March) and are duly represented.
The case does not suffer from nullities and exceptions of lapse of the request for arbitral ruling and illegality of the cumulation of requests were raised.
- Exception of Lapse of the Request for Arbitral Ruling
The Tax Authority raised the question of lapse of the request for arbitral ruling on the grounds that the additional assessments of Stamp Tax and Municipal Tax on Onerous Transfer of Real Estate (IMT) being contested have as their payment deadline 18-12-2013, the date on which they were actually paid, whereby the period for presentation of the request for arbitral ruling is 90 days counted from 18-12-2013, ending on 19-04-2014, whereby the present request for arbitral ruling presented on 17-10-2014 is manifestly untimely.
The Applicant argues that there is no untimeliness as it filed an administrative complaint on 02-04-2014, which resulted in tacit dismissal.
In fact, an administrative complaint was filed by the Applicant on that date, on which no decision was rendered, whereby it is presumed tacitly dismissed on 02-08-2014, four months later, in accordance with Article 57.º, paragraphs 1 and 5, of the General Tax Code (GTC).
In cases where an administrative complaint is filed and tacit dismissal occurs, the period for presentation of a request for constitution of the arbitral tribunal is counted from the date of formation of the tacit dismissal, as results from the express wording of letter a) of paragraph 1 of Article 10.º of the LFATM and the reference it makes to letter d) of paragraph 1 of Article 102.º of the Tax Procedure and Process Code (TPPC).
Therefore, the request for constitution of the arbitral tribunal had to be presented by 02-11-2014, the date on which the 90-day period provided for in that Article 10.º was completed.
And, obviously, it is within that period that the Applicant must present the request for constitution of the arbitral tribunal, formulating a request for a declaration of illegality of an act of one of the types provided for in Article 2.º, paragraph 1, of the LFATM, as occurs with assessment acts.
In fact, the object of arbitral proceedings is necessarily an act or acts of the types provided for in this Article 2.º, which do not include decisions dismissing administrative complaints, whereby the challenging of these as the immediate object will only be possible when they maintain acts of those types, which are always the object of the request for declaration of illegality.
Therefore, it is manifest that it is not necessary to formulate a request for declaration of illegality of the dismissal of the administrative complaint, especially when there was not even a decision dismissing the complaint, as is the case.
Moreover, being perfectly perceptible the intention of the Applicant, an imaginary deficiency of the request by not making reference to the non-existent decision dismissing the administrative complaint would always justify the formulation of an invitation for correction, which in this case is not necessary.
In the present case, the request for constitution of the arbitral tribunal was presented on 17-10-2014, before the end of the 90-day period referred to, whereby it was presented in a timely manner.
Therefore, the exception of lapse raised by the Tax Authority is unsuccessful.
- Exception of Illegality of Cumulation of Requests
The Tax Authority raises the exception of illegality of the cumulation of requests on the grounds that IMT and Stamp Tax assessments are being contested, and there is a lack of identity of nature of the taxes, required by Article 104.º of the TPPC, namely the identity of the grounds of fact and law invoked, which does not occur in the present case.
The Applicant argues that the cumulation of requests is permitted by Article 3.º, paragraph 1, of the LFATM, that there is a relationship of dependence between the assessments, in that Stamp Tax depends on the value of the transaction that is fixed for purposes of IMT, and that it is verified in the present case that the appraisal of all assessments depends essentially on the same circumstances of fact, having consequences in both taxes.
Article 3.º, paragraph 1, of the LFATM permits the cumulation of requests relating to different acts, when the merits of the requests depend essentially on the appraisal of the same circumstances of fact and on the interpretation and application of the same principles or rules of law.
As can be seen, the LFATM does not make the requirement that the taxes have the same nature which is made by Article 104.º of the TPPC, which the Tax Authority invokes.
On the other hand, the rules on cumulation of requests have underlying reasons of procedural economy, whereby they should be interpreted teleologically not from the perspective of placing obstacles to the appraisal of taxpayers' claims, but rather with the aim of enabling cumulation whenever the reasons of economy are present.
Thus, when the appraisal of the same facts is at issue, cumulation shall be justified, as a rule, provided that the questions of law raised, which as a rule will be distinct at the level of different taxes, are not the main object of controversy.
That is the scope of Article 3.º, paragraph 1, in not requiring an absolute identity of questions of fact and law but only an identity as to what is essential.
In the present case, the questions that the Applicant raises are related to the lapse of the right to assess both taxes, which must be resolved essentially on the basis of the same rules, and to the determination of the taxable value to be considered for purposes of IMT, which should be the same, whereby it appears that there exists the essential identity required by Article 3.º, paragraph 1, of the LFATM.
Therefore, the exception of illegal cumulation raised by the Tax Authority is unsuccessful.
- Matters of Fact
The following facts are considered proven:
a) By deed of merger of 11-02-2009, executed at the Notarial Office of …, in Lisbon, REAL ESTATE COMPANY B…, SA was absorbed into the Applicant, with the assets that were part of its patrimony being transferred (document No. 5 attached to the request for arbitral ruling, whose contents are reproduced);
b) The patrimony of the aforementioned REAL ESTATE COMPANY B…, SA included six urban properties and one rural property, all located in the parish of …, municipality of Portimão, on which IMT was assessed by the Tax Administration Services on 05-02-2009, as follows (document No. 6 attached to the request for arbitral ruling, whose contents are reproduced):
c) In all the assessments referred to in the preceding letter, "Transfer of real estate through merger or division of companies" was indicated as the "Taxable Event";
d) In all the assessments referred to relating to urban properties, "Tax Patrimonial Value" was indicated equal to "Declared Value", equal to "Taxable Matter" and equal to "Total Value of Act or Contract", in the following amounts respectively: € 28,741.89, € 10,778.21, € 21,556.42, € 38,082.99, € 21,556.42 and € 52,453.96 (Annex 23 to the Tax Inspection Report);
e) In the assessment relating to the rural property "R …-I" a "Tax Patrimonial Value" of € 32,320.20 was indicated, a "Declared Value" of € 10,043.00, a "Taxable Matter" of € 32,320.20 and a "Total Value of Act or Contract" of € 10,043.00;
f) Between 02-04-2013 and 23-07-2013, an external Tax Inspection of the Applicant took place from which resulted the Tax Inspection Report (TIR) in which a correction of taxable values was proposed for purposes of additional IMT assessments, as follows (document No. 1 attached to the request for arbitral ruling, whose contents are reproduced):
III.2. Corrections in respect of IMT
In accordance with the provisions of letter g) of paragraph 5 of Article 2.º of the Code of Municipal Tax on Onerous Transfers of Real Estate (CIMT), transfers of Real Estate property, operated within the scope of a merger process, are subject to taxation in respect of IMT. On the other hand, rule 13 of paragraph 4 of Article 12.º of the CIMT establishes that "Tax is levied on the tax patrimonial value of all real estate of the merged company ... or on the value at which these assets enter the assets of the new company, if higher". Thus, upon examination of the deed that records the merger carried out on 2009/02/11 and the documents relating to the assessment of IMT that were presented at the same time, it is verified that IMT was paid on the Tax Patrimonial Value (TPV) of the Real Estate, when it should have been paid on the value recorded in the accounts, because this is higher than that.
Thus, at the time of execution of the deed that records the merger, IMT was paid in accordance with what is described in the following table: [table with financial data]
In view of the above, there will be a correction to the taxable matter, for purposes of IMT, of € 4,223,651.59.
g) The Applicant was notified of the draft corrections for purposes of Article 60.º of the GTC and Article 60.º of the Tax Inspection and Collection Regulations, but did not comment;
h) By order of 28-08-2013, of the Director of Finance of Lisbon, the Tax Inspection Report was sanctioned;
i) As a result of the aforementioned corrections, the Tax Authority made the following IMT and Stamp Tax assessments (documents Nos. 2 and 3 attached to the request for arbitral ruling, whose contents are reproduced):
j) The determination of the values to be paid that appear in each one of the assessments was carried out in the manner indicated in the "Notification Note" which constitutes document No. 3 attached to the request for arbitral ruling, whose contents are reproduced, in which it is stated, with regard to each one of the properties, among other things, the following:
"The initial assessment was made based on the tax patrimonial value of the property, because the balance value (Article 12° paragraph 4 rule 13 of the CIMT) was not indicated, whereby it is now used for the additional assessment the balance value, determined by a 'rule of 3' between the tax patrimonial value of the property, the total of the tax patrimonial values of all properties transferred, and the unique balance value of that set of properties of €3,617,435.10";
k) The additional assessments referred to in the preceding letter were notified to the Applicant on 02-12-2013;
l) On 18-12-2013 the Applicant proceeded to pay the additional assessments of IMT and Stamp Tax now being contested;
m) On 04-02-2014 the Applicant filed an administrative complaint regarding the aforementioned assessments, which was not decided within the 4-month period (document No. 4 attached to the request for arbitral ruling, whose contents are reproduced);
n) On 17-10-2014, the Applicant submitted the request for arbitral ruling that gave rise to the present case.
4.1. Facts Not Proven
There are no facts relevant to the decision that have not been proven.
4.2. Justification of the Matters of Fact
The establishment of the facts proven is based on the documents attached to the request for arbitral ruling and those that are part of the administrative file, with no controversy on this matter.
- Matters of Law
5.1. Question of Lapse of the Right to Assess
5.1.1. Positions of the Parties
The Applicant understands that the applicable period of lapse of the right to assess is four years, provided for in Article 31.º, paragraph 3, of the CIMT which establishes that "assessment can only be made until four years have elapsed from the assessment to be corrected, except if it is due to omission of assets or values, in which case it may still be made later, being reserved, in all cases, the provisions of Article 35.º".
The Tax Authority understands that the special period of lapse of eight years provided for in Article 35.º, paragraph 1, of the CIMT is applicable, which establishes that "tax can only be assessed in the eight years following the transfer or the date on which the exemption became ineffective, without prejudice to the provisions of the following paragraph and, as to the rest, Article 46.º of the General Tax Code".
In the present case, the date of the initial assessments coincides with the date of the transfer by merger.
The Applicant understands that the Tax Authority proceeded "to a deficient interpretation of Rule 13 of paragraph 4 of Article 12.º of the Code of IMT (CIMT), in that this standard indicates that in the merger referred to in letter g) of paragraph 2 of Article 5.º of the CIMT – as in the present case – the taxable value subject to tax will be the Tax Patrimonial Value (TPV) of the real estate to be transferred or the balance value at which they enter the new company, if higher".
In the Applicant's understanding, in short, "the TA Services upon deficiently interpreting the provision committed an error of law, and in these circumstances, the period of lapse for making additional assessments is four years, in accordance with paragraph 3 of Article 31.º of the CIMT". "Thus, having the initial assessments occurred on 9 February 2009 and the taxes in question being considered of single obligation, the additional assessments in order to come within the applicable law would have to take place until 9 February 2013. That is, within the four-year period". "Given that the additional assessments of IMT and Stamp Tax, now in question, were only made and notified to the applicant in December 2013, with no cause for suspension or interruption of the period of lapse occurring, it is determined that the right to make such assessments has lapsed, with the same therefore suffering from illegality".
The Tax Authority argues that "it was the intention of the legislator in establishing an exception to the general rules for cases where there is an omission of assets or values, in which case the assessment period is 8 years from the taxable event instead of 4 years from the assessment to be corrected" and that "as ascertained by the tax inspection, the Applicant in the statement presented for purposes of the initial assessment of IMT on its own initiative, under paragraph 1 of Article 19.º of the CIMT, omitted values to be considered for purposes of tax", whereby the situation is excluded from the scope of application of paragraph 3 of Article 31.º of the CIMT, because the error in considering the tax patrimonial value of the real estate instead of its balance value upon entry into the new company is not in the least attributable to the TA:
"a) On the one hand, because the original assessment, although on the TA's initiative, is based on the statement made by the now Applicant;
b) On the other hand, because that statement delivered by the Applicant identified the tax patrimonial value of the property as being the relevant value for purposes of rule 13 of paragraph 4 of Article 12.º of the CIMT, and the balance value was not within the TA's knowledge so that any negligence could be attributed to the TA in determining the legally relevant value".
5.1.2. Decision on the Question of Lapse
The resolution of the question of lapse depends, thus, on the scope of the reference to the omission of values made in Article 35.º, paragraph 1, namely whether there is such a situation when the taxpayer declared in the IMT assessment the value it deemed appropriate.
Transfers of real estate through merger or division of commercial companies or through merger of such companies between themselves or with a civil society company are subject to IMT, in accordance with Article 2.º, paragraph 5, letter g) of the CIMT, with the tax levied "on the tax patrimonial value of all real estate of the merged or divided companies that are transferred to the assets of the companies resulting from the merger or division, or on the value at which those assets enter the assets of the companies, if higher".
IMT is owed by natural or legal persons to whom the real estate is transferred (Article 4.º of the CIMT).
The assessment of IMT is at the initiative of the interested parties, for which purpose they must submit, to any finance office or by electronic means, a declaration on the official form duly filled in (Article 19.º, paragraph 1, of the CIMT).
In accordance with Article 20.º of the CIMT, for purposes of assessment, the interested party must provide the following information:
a) The identification of the real estate or an indication that they are missing from the tax registers, as well as the value stated in the act or contract;
b) The value attributed to the assets, with specification of what corresponds to component parts whose value is not included in the tax patrimonial value of the respective properties;
c) Information on whether the acquisition will or will not be made within the scope of one of the acts or contracts provided for in paragraph 3 of Article 2.º, attaching a copy of the respective document in the cases provided for in its letters a) and b);
d) Any other information indispensable for the exact assessment of the tax.
IMT is assessed by the central services of the Tax Authority, based on the declaration of the liable party or ex officio, being considered, for all legal purposes, the tax act performed at the competent finance office (Article 21.º, paragraph 1, of the CIMT).
In the present case, it does not appear in the administrative file the declaration for assessment (Form 1) that the Applicant submitted to the Tax Authority for purposes of assessment, but it is inferred from the assessments that it was indicated by the Applicant that the transfer of the real estate had been "through merger or division of companies" and attributed to the six urban properties in question their respective tax patrimonial values, as deduced from the references to the "declared value" that appear in the assessments. As regards the rural property, a value lower than the tax patrimonial value will have been attributed by the Applicant, which led to the assessment being made at this value.
In the "Instructions for filling in" Form 1 declaration for IMT assessment, it is expressly stated, with regard to field 45 – "Value of Act or Contract" – that "in the case of taxable events identified with codes 19 and 22 to 25 of the same table, record the value at which the assets enter the assets of the company (Article 12.º, paragraph 4, rules 12 and 13 of the CIMT)". In the present case, the "declared value" that was indicated in the assessments was a value identical to the tax patrimonial value, as regards the urban properties and a value lower than the tax patrimonial value as regards the rural property, values which in any case did not correspond to the value at which the assets entered the Applicant's assets. Moreover, this value should have been attributed by force of the provisions of letter d) of paragraph 1 of Article 20.º of the CIMT, because knowledge of it was indispensable "for the exact assessment of the tax".
In fact, in view of the aforementioned instructions for filling in Form 1, in which the indication of the value at which the assets enter the assets of the company is always imposed (therefore, even if this value is lower than the tax patrimonial value, it is that value of entry into the accounts that should be recorded), the declaration of the tax patrimonial values in table 45 of Form 1 had the scope of expressing that these were the values at which the assets entered the company's assets, which did not correspond to reality. That is, in the context of the declaration, the Applicant did not make a legal error in indicating the tax patrimonial values (and the lower value in the case of the rural property) instead of the balance values, rather indicated the values as if they were the values of the entry of the assets into its assets, because that is the scope of the recording of a value in the referred field 45 of Form 1.
There is, thus, a lack of indication by the Applicant of a value that should be declared, whereby there is a situation of omission of values, for purposes of Articles 31.º, paragraph 3, and 35.º, paragraph 1, of the CIMT. Paragraph 1 of Article 31.º, by connecting the powers of correction of the Tax Administration with situations of omission of values, corroborates this interpretation, given that there is manifestly a situation in which correction powers are usable, which, moreover, is not even questioned by the Applicant.
Thus, the situation falls within the exception provided for in paragraph 3 of Article 31.º of the CIMT, whereby the special period of lapse of the right to assess of eight years provided for in Article 35.º, paragraph 1, of the same Code is applicable.
Consequently, having the transfer occurred in 2009 and the additional assessment in 2013, it must be concluded that the right to assess IMT has not lapsed.
5.2. Question of Erroneous Quantification of Taxable Value in Each Assessment
5.2.1. Positions of the Parties
The Applicant states that "the TA Services, upon determining the taxable value for purposes of additional assessments, resorted to a global value of all real estate (urban and rural) recorded in the company's accounts and without any legal foundation decided to establish mathematical proportions between the aforementioned global balance value of the real estate and each of the tax patrimonial values, resulting in random taxable values with no sense whatsoever.
For the TA Services to proceed with additional IMT assessments such as those in the present case, they would have had to indicate the balance value of each of the properties which would constitute the respective taxable value.
This fact manifestly violates the "principle of legality" which underlies the assessment of taxes, given the provisions of Article 8.º, paragraph 2, letter a) of the General Tax Code (GTC).
It should be emphasized that the "principle of legality" is enshrined in the Constitution (Article 266.º, paragraph 2 of the Constitution), translating into the requirement regarding taxes, namely as to the rules of assessment, that the same be approved by formal law of the National Assembly or decree-law authorized by the Government. Such rules could never be in the sphere of decision-making of an administrative structure such as the TA.
This erroneous quantification of the taxable values determined makes the subsequent assessments illegal, in addition to unjust, bearing in mind that tax patrimonial values of urban properties, recently evaluated, were mixed with the tax patrimonial value of the rural property evaluated decades ago (this having very low tax patrimonial value and considerably high selling value), with different tax rates (IMT) being applied to one and the other type of property".
The Tax Authority, in its Reply, defends the following:
"22. The additional assessment was made in compliance with rule 13 of paragraph 4 of Article 12.º of the CIMT using the balance value, whereby it does not suffer from any defect of violation of law.
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The "rule of 3" used by the Tax Administration was based on the adoption of a criterion proportionally identical to what was recorded in the Balance Sheet in relation to what appears as Tax Patrimonial Value.
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It is a rule that applies a certain mathematical proportion existing in one magnitude to another magnitude maintaining the same proportional balance in both.
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In essence, it is about replicating a determined mathematical reality in another order of magnitude maintaining the equidistance and proportion between the elements in question.
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It should be noted that the Applicant, notified to comment on the Tax Inspection report, and on this matter in particular said nothing or contradicted anything, having even requested the payment slips and made the payment of the additional assessments".
5.2.2. Decision on the Question of Erroneous Quantification of Taxable Value in Each Assessment
As referred to in the matters of fact established, as regards each one of the properties the Tax Authority made the assessment using "the balance value, determined by a 'rule of 3' between the tax patrimonial value of the property, the total of the tax patrimonial values of all properties transferred, and the unique balance value of that set of properties of €3,617,435.10".
Rule 13 of paragraph 4 of Article 12.º of the CIMT, by establishing that "in the merger or division of the companies referred to in letter g) of paragraph 5 of Article 2.º, the tax is levied on the tax patrimonial value of all real estate of the merged or divided companies that are transferred to the assets of the companies resulting from the merger or division, or on the value at which those assets enter the assets of the companies, if higher" points to the effect that, in these cases of merger or division of companies, the value on which IMT is levied is that "of all the real estate" and not that of each one of them, which will make it possible that there is not an assessment relating to each property, but a single one based on the total value of the properties transferred as the subject-matter of a single assessment.
However, beyond the fact that this global consideration of the value of the real estate is only viable when all have the same nature for purposes of application of the rate (in view of the categories indicated in Article 17.º of the CIMT), that was not, however, what the Tax Administration did, because it took into account the global value of the properties transferred not as the basis for a single assessment, but rather as a reference for calculating the taxable matter of each one of the properties and the various assessments, relating to each one of them.
It is a form of calculation of the taxable value that has no legal support, because there is no provision that allows the calculation of the taxable value of each one of the properties based on values attributed to others.
The activity of the Tax Administration within the scope of tax legal relationships is subject to the principle of legality (Articles 266.º, paragraph 2, of the Constitution and 55.º of the GTC), whose content, in general, is defined in Article 3.º of the Code of Administrative Procedure of 1991, subsidiarily applicable to tax procedure by force of the provisions of letter c) of Article 2.º of the GTC.
This principle currently has the positive formulation that "the bodies of the Public Administration must act in obedience to law and right, within the limits of the powers attributed to them and in accordance with the purposes for which the same powers were conferred on them".
In this Article 3.º, the principle of legality ceased to have "a formulation only negative (as in the Liberal State period), to come to have a positive formulation, constituting the foundation, the criterion and the limit of all administrative action". ([1])
"The law is not only a limit to the action of the Administration: it is also the foundation of administrative action. This means that, nowadays, there is no free power for the Administration to do whatever it wishes, except when the law prohibits it; on the contrary, the rule applies that the Administration can only do what the law allows it to do". ([2]) ([3])
It follows from this positive content of the principle of legality, from the outset, that without the prior establishment, by legislative means, of procedural rules that allow the determination of the value of taxable matter relating to each one of the properties through the application of a rule of three to the value of a set of properties, this method cannot be used.
It is true that, if all the properties were of the same nature for purposes of application of the IMT rate, there might not be a difference, in practice, at the level of taxation, between the result of the use of the method used by the Tax Administration and that of the consideration of the global value of the properties transferred.
But, in the present case, the properties are not of the same nature for purposes of application of the rates provided for in paragraph 1 of Article 17.º of the CIMT, because urban and rural properties were transferred, to which different rates apply, with the Tax Administration applying the rate of 6.5% to the properties with the cadastral references Nos. U-…, U-…, U-… and U-…, the rate of 6% to the properties with cadastral references U-… and U-… and the rate of 5% to the property with cadastral reference R-…-I.
Therefore, it is not demonstrated that it is indifferent for determination of the value of the taxes levied on the transfer of each one of the properties.
Thus, it must be concluded that the contested assessments suffer from the defect of violation of law, by error in the determination of taxable matter.
5.3. Stamp Tax Assessments
As regards Stamp Tax, it is manifest that no lapse of the right to assess occurs, because the period is eight years, when onerous acquisition of the right to ownership of real estate subject to taxation under item 1.1 is in question (Article 39.º, paragraph 1, of the Stamp Tax Code).
The Stamp Tax assessments, under item 1.1 of the Tax General Table for Stamp Tax, were based on the same determination of the taxable matter of IMT, whereby they suffer from the same defect of violation of law.
Also in this case, it cannot be considered demonstrated that the assessment based on the value of the set of properties to determine the tax owed on the transfer of each one of them would have a result equivalent to that of the assessment relating to each one, because, ignoring the values at which each one of the properties entered the assets of the company, it is not excluded that in relation to one or some, the difference between the value of entry into the accounts and that which was declared would not permit assessing tax, because this would be less than the technical exemption provided for in Article 44.º, paragraph 2, of the Stamp Tax Code ([4]).
- Reimbursement of Sums Paid and Compensatory Interest
The Applicant paid the assessed sums, as was considered proven in letter l) of the matters of fact established.
The Applicant further requests compensatory interest for the unduly paid sums referred to.
In accordance with the provisions of letter b) of Article 24.º of the LFATM, the arbitral decision on the merits of the claim from which no appeal or challenge can be made binds the Tax Administration from the end of the period provided for the appeal or challenge, with the latter, in the exact terms of the merits of the arbitral decision in favor of the liable party and until the end of the period provided for voluntary execution of the sentences of the tax courts, "re-establish the situation that would exist if the tax act that is the subject of the arbitral decision had not been performed, adopting the acts and operations necessary for that purpose", which is in keeping with the provisions of Article 100.º of the GTC [applicable by force of the provisions of letter a) of paragraph 1 of Article 29.º of the LFATM] which establishes that "the tax administration is obliged, in case of total or partial merits of an administrative complaint, judicial challenge or appeal in favor of the liable party, to the immediate and full re-establishment of the legality of the act or situation that is the subject of the dispute, including the payment of compensatory interest, if applicable, from the end of the period of execution of the decision".
Although Article 2.º, paragraph 1, letters a) and b), of the LFATM uses the expression "declaration of illegality" to define the jurisdiction of the arbitral tribunals that function in the CAAD, making no reference to condemnatory decisions, it should be understood that the jurisdiction includes the powers that in judicial challenge proceedings are attributed to the tax courts, this being the interpretation that is in keeping with the sense of the legislative authorization on which the Government based itself for approving the LFATM, in which is proclaimed, as the first guideline, that "the tax arbitral process must constitute an alternative procedural means to the judicial challenge process and to the action for recognition of a right or legitimate interest in tax matters".
The judicial challenge process, despite being essentially a process of annulment of tax acts, permits the condemnation of the Tax Administration in the payment of compensatory interest, as is apparent from Article 43.º, paragraph 1, of the GTC, in which it is established that "compensatory interest is owed when it is determined, in an administrative complaint or judicial challenge, that there was error attributable to the services from which resulted payment of the tax debt in an amount greater than the legally owed" and from Article 61.º, paragraph 4 of the TPPC (in the wording given by Law No. 55-A/2010, of 31 December, which corresponds to paragraph 2 in the original wording), which states that "if the decision that recognized the right to compensatory interest is judicial, the payment period is counted from the beginning of the period of voluntary execution".
Thus, paragraph 5 of Article 24.º of the LFATM, by stating that "the payment of interest is due, regardless of its nature, in the terms provided in the general tax law and in the Tax Procedure and Process Code", should be understood as permitting the recognition of the right to compensatory interest in the arbitral process.
It is therefore appropriate to appraise the request for reimbursement of the amount unduly paid, plus compensatory interest.
In the present case, it is manifest that, as a consequence of the illegality of the assessment acts, there is a right to reimbursement of the tax paid, by force of the aforementioned Articles 24.º, paragraph 1, letter b), of the LFATM and 100.º of the GTC, as this is essential to "re-establish the situation that would exist if the tax act that is the subject of the arbitral decision had not been performed".
As regards compensatory interest, it is also clear that the illegality of the assessment acts is attributable to the Tax Administration, which on its own initiative performed them without legal support.
Consequently, the Applicant is entitled to compensatory interest, in accordance with Article 43.º, paragraph 1, of the GTC and Article 61.º of the TPPC.
The compensatory interest shall be paid in relation to each one of the assessments from the date on which the Applicant made the respective payment until complete reimbursement of the paid amount, at the legal rate, in accordance with Articles 43.º, paragraph 4, and 35.º, paragraph 10, of the GTC, Article 61.º of the TPPC, Article 559.º of the Civil Code and Order No. 291/2003, of 8 April.
- Decision
In accordance with the above, the Arbitral Tribunal agrees to:
a) Adjudge as having merits the requests for annulment of the following assessments which are hereby annulled:
– IMT assessment No. ..., in the amount of €31,019.86;
– IMT assessment No. …, in the amount of €11,632.45;
– IMT assessment No. …, in the amount of €23,264.89;
– IMT assessment No. … in the amount of €37,749.25;
– IMT assessment No. … in the amount of €23,264.89;
– IMT assessment No. … in the amount of €54,879.24;
– IMT assessment No. … in the amount of €26,832.13;
– Stamp Tax assessment No. … in the amount of €3,817.82;
– Stamp Tax assessment No. … in the amount of €1,431.68;
– Stamp Tax assessment No. … in the amount of €2,863.37;
– Stamp Tax assessment No. … in the amount of €5,058.63;
– Stamp Tax assessment No. … in the amount of €2,863.37;
– Stamp Tax assessment No. … in the amount of €6,967.54;
– Stamp Tax assessment No. … in the amount of €4,293.14.
b) Adjudge as having merits the request for condemnation of the Tax Authority to reimburse the assessed and paid sums;
c) Condemn the Tax Authority to pay to the Applicant compensatory interest on each one of the paid sums referred to, from the date of the respective payment until the date of reimbursement, at the legal rate.
- Value of the Case
In accordance with the provisions of Article 305.º, paragraph 2, of the Code of Civil Procedure and Article 97.º-A, paragraph 1, letter a), of the TPPC and Article 3.º, paragraph 2, of the Regulations of Costs in Tax Arbitration Proceedings, the value of the case is set at € 236,478.26.
- Costs
Pursuant to Article 22.º, paragraph 4, of the LFATM, the amount of costs is set at € 4,284.00, in accordance with Table I annexed to the Regulations of Costs in Tax Arbitration Proceedings, to be charged to the Tax Authority.
Lisbon, 23 March 2015
The Arbitrators
(Jorge Manuel Lopes de Sousa)
(João Sérgio Ribeiro)
(Jaime Carvalho Esteves)
[1] FREITAS DO AMARAL, JOÃO CAUPERS, JOÃO MARTINS CLARO, JOÃO RAPOSO, PEDRO SIZA VIEIRA and VASCO PEREIRA DA SILVA, in Code of Administrative Procedure Annotated, 3rd edition, page 40.
In similar sense, it can be seen the first Author in Course of Administrative Law, volume II, page 42.
[2] FREITAS DO AMARAL, Course of Administrative Law, volume II, pages 42-43.
In similar sense, can be seen:
– MARCELO REBELO DE SOUSA, Lessons of Administrative Law, 1999, volume I, page 84, which states:
"With the post-liberal State, in any of its three modalities, legality passes from external to internal.
The Constitution and law cease to be merely limits to administrative activity, to become the foundation of that activity.
The logic of freedom or autonomy, which private parties enjoy, ceases to apply – that they can do everything that the Constitution and law do not prohibit – for the primacy of competence to be affirmed, Public Administration can only do what it is permitted by the Constitution and law, and in the exact terms in which they permit it."
– MÁRIO ESTEVES DE OLIVEIRA, PEDRO COSTA GONÇALVES and J. PACHECO DE AMORIM, in Code of Administrative Procedure Commented, volume I, 1st edition page 138, in which they state that
"The formulas used seem unequivocal manifestations that, for the legislator of the Code, the action of the Public Administration is commanded by law, being illegal not only the administrative acts (regulations or contracts) produced against legal prohibition, but also those that do not have provision or legal authorization, even if generic (or even budgetary)".
– ANTÓNIO FRANCISCO DE SOUSA, in Code of Administrative Procedure Annotated, page 56:
"Now, this principle does not admit, unlike what happens with private parties, that it be possible for the Administration everything that the law does not prohibit, but rather it imposes that only what is positively permitted to it by law is possible."
[3] In this sense, it can be seen the judgment of the Plenary of the Supreme Administrative Court of 24-11-2004, case No. 225/03.
[4] The application of this technical exemption actually occurred with regard to the only property as regards which the Tax Authority autonomously determined the value of entry into the assets of the Applicant, which was the urban property with cadastral reference…, as can be seen from the table that appears in letter f) of the matters of fact established.
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