Process: 722/2016-T

Date: May 30, 2017

Tax Type: IMI

Source: Original CAAD Decision

Summary

CAAD arbitration case 722/2016-T addresses the legality of IMI assessments on property matrices from extinct parishes following Portugal's 2013 administrative reorganization. A company challenged three 2015 IMI assessments (installments 1-3) levied on urban properties registered under an extinct parish, arguing the assessments were illegal because: (1) the properties were duplicated in both old extinct parish records and new Union of Parishes records, and (2) the Tax Authority (TCA) failed to apply the special VPT regime under Article 15-N of Decree-Law 287/2003 for non-residential leased properties. The claimant had submitted rental income notifications that remained unvalidated due to incomplete assessment procedures. The TCA defended its position by reactivating extinct parish records for taxation purposes while suspending taxation on new parish records to avoid double collection. The core legal issue centers on whether IMI assessments based on TPV from extinct parish matrices are valid when: the properties qualify for special valuation under Article 15-N for rental income, proper notifications were submitted but not validated through no fault of the taxpayer, and duplicate records exist post-parish reorganization. The case highlights procedural complications arising from Law 11-A/2013's territorial reorganization and the interaction between automatic record updates and special tax regimes for leased commercial properties.

Full Decision

ARBITRAL DECISION

I – REPORT

  1. A… NIPC[1]…, with registered office at Avª… no…, in the area of the… tax authority office of Lisbon, filed a request for arbitral ruling, pursuant to the provisions of subparagraph a) of no. 1 of article 2, of no. 1 of article 3 and of subparagraph a) of no. 1 of article 10, all of the LJATM[2], requesting the TCA[3], with a view to annulling the IMT[4] assessments nos. …, … and …, relating to the year 2015, with all legal consequences, namely the elimination of the urban property records of articles … and …, concerning the extinct parish of … in the municipality of Almada, on the grounds that they are illegal.

  2. The request was made without exercising the option of arbitrator appointment, and was accepted by His Excellency the President of AACB[5] on 06/12/2016 and notified to the TCA on the same date.

  3. Pursuant to the provisions of no. 2 of article 6 of the LJATM, by decision of His Excellency the President of the Deontological Council, duly communicated to the parties within the legally applicable periods, on 31/01/2017, Arlindo José Francisco was appointed as arbitrator of the tribunal, who communicated acceptance of the appointment within the legally stipulated period.

  4. The tribunal was constituted on 15/02/2017 in accordance with the provisions contained in subparagraph c) of no. 1 of article 11 of the LJATM, as amended by article 228 of Law no. 66-B/2012, of 31 December.

  5. With its request, the claimant seeks the annulment of the aforementioned assessments, since the TCA is assessing IMT on two property records of a parish that is extinct, whilst doing so on the basis of TPV[6] that does not take into account the provisions of article 15-N of Decree-Law no. 287/2003 of 12 November.

  6. It supports its position, in summary, on the fact that the properties are duplicated with old records and new records, that is, articles … and … of the extinct parish of … are duplicated with articles … and … of the Union of parishes … and …, making it impossible to issue the corresponding property books.

  7. The tax being levied results from the TPV corresponding to the articles of the old extinct parish that the local tax service cannot eliminate, thus we are dealing with illegal assessments as they fall upon TPV of records already extinct, with duplication of collection with the new articles (… and …. of the Union of Parishes … and …).

  8. For everything to be correct, it would suffice for the TCA to eliminate the articles of the extinct parish and await the general assessment of the new articles of the Union of parishes … and … and apply the special regime for rental income in determining the TPV subject to IMT, for which it has been duly submitting the respective notifications.

  9. In its response, the respondent, and also in summary, states there is no duplication of collection given that no tax was levied on the TPV of articles … and …, as the assessment of the same has not been completed.

  10. The TPVs that served as the basis for the contested assessments result from the updates defined by law and not from any general assessment or any other assessment procedure provided for in the MPTC[7].

  11. Concluding that the assessments in question were not based on the TPV calculated in accordance with article 15-N of DL 287/2003, as the assessment procedures have not been completed nor have the rental income notifications been validated.

II - PROCEDURAL MATTERS

The tribunal was regularly constituted.

The parties have legal standing and capacity, demonstrate legitimate interest and are regularly represented in accordance with articles 4 and 10, no. 2 of the LJATM and article 1 of Ordinance no. 112-A/2011, of 22 March.

Following the respondent's response, the tribunal issued, on 18/04/2017, the following order:

"Following the submission of the TA's response and after analysis of the file, the tribunal considers unnecessary the holding of the meeting provided for in article 18 of the LJATM and also unnecessary the production of oral or written submissions. Accordingly, the parties shall be notified to state, if they wish, within 10 days, their observations on this understanding."

On 24/04/2017 a motion by the claimant was filed, and on the 12th of the current month the following order was issued:

"Having regard to the order of 18 April last and the claimant's motion of the 24th of the said month, notified to the respondent on the same date, I consider the conditions met to issue a decision, fixing 30 May, of the current month, for this purpose, and the respondent shall, until the date of the decision, provide proof to the AACB of compliance with the provisions of no. 3 of article 4 of the RCTAT."

Accordingly, as the proceedings are free from defects, it is proper to decide.

III - LEGAL REASONING

  1. The issue to be resolved, with relevance to the file, is as follows:

Whether the IMT assessments for 2015 nos. …, … and …, corresponding to the 1st, 2nd and 3rd installments should be annulled for being declared illegal with all legal consequences arising therefrom, namely the elimination of the urban property records nos. … and … of the extinct parish of …, or whether, on the contrary, they should be maintained in the legal order for respecting the legal norms in force.

2 – Findings of Fact

a) The claimant is an English entity based in Portugal and which previously had the name B… which, in 1953, entered into a lease agreement of properties with C…, then designated D… SA.

b) The assessments here in question concern the year 2015 and the urban articles … and … of the extinct parish of …, now registered in the urban property record of the Union of parishes … and … under articles … and …, which are part of the aforementioned lease agreement.

c) The IMT in question concerns articles reactivated for assessment purposes of the extinct parish of … (… and …), with taxation of the articles … and … of the Union of Parishes … and … being suspended, by virtue of the fact that they have not yet been assessed in accordance with the MPTC.

d) The claimant has been submitting the competent rental income notifications which have not yet been validated, due to the lack of assessment of the same.

e) The properties in question are in a position to benefit from the special regime, provided for in DL 287/2003 of 12 November, for leased urban properties.

f) The taxation carried out did not take into account the rental income notifications which were not validated due to facts not attributable to the taxpayer.

The proof of these facts results from the documents attached to the file which were not contested by the parties, as well as from the content of the attached administrative file.

3 - Legal Matters

Law 11-A/2013 of 28 January implemented the administrative reorganization of the territory of parishes provided for in Law no. 22/2012, of 30 May, as a result of which there were changes in the identification of properties with changes in the property record number and parish, an operation carried out by the TCA services in an automatic manner, with taxpayers merely required to request the updating of property books if necessary.

The creation of a new parish by aggregation of others determines the legal cessation of the aggregated local authorities, as established by article 4 of the aforementioned Law 11-A/2013.

In the vast majority of situations, everything proceeded normally, the assessments fell upon the TPV of the new property record articles, however, special situations such as those of the present file, the TCA reactivated extinct articles of an extinct parish for the purpose of proceeding with their assessment in accordance with the MPTC and simultaneously levied taxation on them, being careful not to tax the new articles so as to avoid duplication of collection.

The regime provided for in article 15-N of DL 287/2003 of 12 November, added by Law 60-A/2011 of 30 November establishes the premise that properties are assessed in accordance with the MPTC which did not occur in the concrete situation of the present file, which the TCA justifies by the lack of definition of the criteria to be followed in the assessment, which would only have emerged in 2016. The tribunal understands that only after the assessment which would then allow comparison with the TPV resulting from the application of the special regime and the validation of rental income notifications should taxation proceed, as the impossibility invoked by the TCA is not attributable to the claimant.

We must take into account that reactivating property record articles electronically for internal procedures of property records legally ceased may be admitted, but this would no longer be the case when such procedures generate external effects to the TCA, as was the case where articles of property records already extinct are taxed, requiring the payment of tax.

Thus, although there is no duplication of collection since the TPV of the articles … and … of the new legal situation was not taxed - urban property record of the Union of parishes of … and … - there was taxation of the urban articles … and … of the extinct parish of …, without the rental income notifications, duly submitted by the claimant, having been observed and taken into account, which is justified by facts not opposable to it, such as the lack of definition of criteria for assessment and the suspension thereof.

As already stated, the reactivation of property record articles of legally extinct parishes would be understandable in IT terms and exclusively for internal procedures of the TCA services, but would no longer be acceptable for the production of external effects such as the levying of IMT on TPV of articles and property records legally ceased, as is the case.

The tribunal therefore understands that the assessments …, … and … are tainted with illegality as they concern property record articles of a parish with legal cessation and identity, at the time of taxation, in accordance with article 4 of Law 11-A/2013 of 28 January, and therefore should be annulled with all legal consequences arising therefrom.

IV – DECISION

Accordingly, the tribunal decides:

a) To declare the request for arbitral ruling well-founded, with the consequent annulment of the IMT assessments relating to the year 2015 nos. …, … and …, corresponding to the 1st, 2nd and 3rd installments for being illegal, with all legal consequences arising therefrom, namely the elimination of the urban property records nos. … and … of the extinct parish of….

b) To set the value of the proceedings at € 44,347.79 in accordance with the provisions contained in article 299, no. 1, of the CPC[8], article 97-A of the TPPC[9], and article 3, no. 2, of the RCTAT[10].

c) To set the costs, under no. 4 of article 22 of the LJATM, at the amount of € 2,142.00 in accordance with the provisions of Table I referred to in article 4 of the RCTAT, which are borne by the respondent.

Lisbon, 30 May 2017

Document prepared by computer, pursuant to article 131, no. 5 of the CPC, applicable by reference to article 29, no. 1, subparagraph e) of the LJATM, with blank lines and reviewed by the tribunal.

The Arbitrator

Arlindo José Francisco

[1] Acronym for Collective Person Identification Number

[2] Acronym for Legal Regime for Arbitration in Tax Matters

[3] Acronym for Tax and Customs Authority

[4] Acronym for Municipal Property Tax

[5] Acronym for Administrative Arbitration Center

[6] Acronym for Taxable Patrimonial Value

[7] Acronym for Municipal Property Tax Code

[8] Acronym for Civil Procedure Code

[9] Acronym for Tax Procedure and Process Code

[10] Acronym for Regulation of Costs in Tax Arbitration Proceedings

Frequently Asked Questions

Automatically Created

What happens when IMI is charged on property matrices from extinct parishes in Portugal?
When IMI is charged on property matrices from extinct parishes in Portugal, it may constitute an illegal assessment if duplicate records exist in successor parishes. Following the 2013 administrative reorganization under Law 11-A/2013, extinct parishes ceased legal existence, and their property records should have been transferred to new Union of Parishes. Tax authorities occasionally reactivate extinct parish records for assessment purposes while suspending taxation on new records to avoid double collection. However, such assessments can be challenged through CAAD arbitration if they violate legal norms, particularly when special valuation regimes apply or when the legal basis for taxation on extinct matrices is questionable.
How does the VPT (Valor Patrimonial Tributário) special regime apply to non-residential leased properties under Article 15-N of Decree-Law 287/2003?
The VPT special regime under Article 15-N of Decree-Law 287/2003 (added by Law 60-A/2011) applies to urban properties leased for non-residential purposes by establishing an alternative valuation methodology based on rental income rather than standard patrimonial value calculations. Property owners must submit rental income notifications to tax authorities for validation. Once validated, the VPT for IMI purposes is calculated using rental income data, typically resulting in lower tax assessments for leased commercial properties. However, if assessment procedures are incomplete or notifications remain unvalidated due to administrative delays not attributable to the taxpayer, the Tax Authority cannot levy IMI based on standard VPT calculations without considering the special regime entitlement.
Can duplicate property tax assessments be annulled through CAAD arbitration?
Yes, duplicate property tax assessments can be annulled through CAAD arbitration. Taxpayers can file arbitration requests under Article 2(1)(a) and Article 10(1)(a) of the LJATM (Legal Framework for Administrative Tax Arbitration) to challenge illegal IMI assessments. Grounds for annulment include: double taxation resulting from overlapping property records (extinct parish vs. new parish), assessments based on incorrect VPT calculations that ignore special regimes, and taxation on legally extinct property matrices. The arbitration tribunal has jurisdiction to annul illegal assessments and order consequential relief, including elimination of outdated property records from tax databases and correction of assessment procedures to ensure compliance with applicable legal frameworks.
What is the legal basis for challenging illegal IMI tax assessments on outdated urban property matrices?
The legal basis for challenging illegal IMI assessments on outdated urban property matrices includes: (1) Article 2(1)(a) and Article 10(1)(a) of the LJATM, which grant CAAD jurisdiction over tax assessment annulment requests; (2) Law 11-A/2013, which legally extinguished parishes through administrative reorganization, rendering their property records obsolete; (3) substantive violations of CIMI (Municipal Property Tax Code) and MPTC (Model for Property Tax Assessment) when assessments ignore special valuation regimes; (4) Article 15-N of Decree-Law 287/2003 establishing special VPT calculation for leased properties; and (5) general administrative law principles requiring taxation based on legally valid, current property records. Taxpayers must demonstrate that assessments violate these legal norms and request annulment with all consequential legal effects.
How does parish reorganization in Portugal affect IMI property tax records and assessments?
Parish reorganization under Law 11-A/2013 significantly affects IMI property tax records and assessments by creating administrative discontinuity in property identification. Aggregated parishes legally cease to exist (Article 4), requiring automatic transfer of property records to successor Union of Parishes with new article numbers and parish designations. Tax authorities must update property books automatically, though taxpayers can request updates if necessary. Complications arise when: old records from extinct parishes are reactivated for taxation while new records remain unassessed, creating potential duplicate taxation scenarios; assessment procedures under MPTC are incomplete for new parish records; and special tax regimes (like Article 15-N for leased properties) remain unapplied during the transition period. These administrative gaps can result in illegal assessments challengeable through arbitration.