IMT and Stamp Tax Exemption for Tourism Enterprises Under Article 20 DL 423/83 – CAAD 730/2014-T

Case 730/2014-T

Arbitration Award

The arbitrators José Pedro Carvalho, André Bacelar Gonçalves and Guilherme W. d'Oliveira Martins, appointed by the Deontological Council of the Centre for Administrative Arbitration (CAAD) to form the arbitral tribunal established on 23 December 2014, decide as follows:

I - REPORT

1. On 20.10.2014, A..., SA, NIPC ... submitted a request for the establishment of an arbitral tribunal, in accordance with and for the purposes of the provisions of Articles 2 and 10 of Decree-Law No. 10/2011, of 20 January (Legal Framework for Tax Arbitration, hereinafter "RJAT"), requesting the Tax and Customs Authority (AT).

2. The request for establishment of the Arbitral Tribunal was accepted by the Honourable President of CAAD on 20.10.2014 and automatically notified to the AT on 21.10.2014.

3. Pursuant to Article 6, paragraph 1, and Article 11, paragraph 1, letter b) of Decree-Law No. 10/2011, of 20 January, as amended by Article 228 of Law No. 66-B/2012, of 31 December, the Deontological Council appointed as arbitrators of the collective arbitral tribunal the present signatories, who communicated acceptance of the respective appointment within the applicable timeframe.

4. On 23.12.2014 the parties were duly notified of this appointment and did not manifest any intention to refuse the appointment of the arbitrators pursuant to the combined provisions of Article 11, paragraph 1, letters a) and b) of the RJAT and Articles 6 and 7 of the Deontological Code.

5. Thus, pursuant to Article 11, paragraph 1, letter c) of Decree-Law No. 10/2011, of 20 January, as amended by Law No. 66-B/2012, of 31 December, the arbitral tribunal was established on 23.12.2014.

6. On 20.03.2015 the first meeting of the Tribunal took place, in accordance with and for the purposes of Article 18 of the RJAT, and minutes thereof were drawn up, which are also attached to the case file.

7. At the said hearing, the witness called by the requesting party was examined, who identified himself as B..., and the representatives of the Requesting and Requested parties were given the opportunity to make their respective oral arguments, which they did.

8. Pursuant to Article 18, paragraph 2, of the RJAT, the Tribunal fixed 20.04.2015 as the date for issuing the arbitration award.

9. On 23-03-2015, the Requesting Party submitted a Motion in the case, reporting that by Office No. ... of 30.03.2015, it was notified of a new tax assessment act for Municipal Tax on Onerous Real Estate Transfers (IMT) issued by the Deputy Head of Finance, which results in the same levy of €66,625.00, and requesting the expansion of the subject matter of the arbitral decision, in accordance with Article 20, paragraph 1, of the RJAT, in order to include in the subject matter of the Arbitral Tribunal's decision the new IMT tax assessment act.

10. The Requested Party submitted, on 13 April 2015, a motion informing that according to clarifications obtained from the Financial Services of ..., the levy referred to by the Requesting Party would have been made in error and that steps were being taken to notify the taxpayer of this fact.

11. On 14.04.2015 the deadline referred to in 8 was interrupted following the motion referred to in the previous number, submitted by the requested party, which was notified to present evidence within 10 days of the allegations in points 5 and 6 of that motion, as well as the Requesting Party was notified to exercise the right to reply, within the same deadline. In this connection, the Requesting Party communicated, among other things, that "if it is confirmed that we are dealing with a 'phantom' tax assessment act, the request for expansion should be disregarded as having become moot". The Requested Party, on 27-04-2015, submitted the missing documentary evidence, on which the Requesting Party commented on 08-05-2015.

12. By order of 11.05.2015, the Tribunal fixed a 30-day period for the decision, which it extended until 23.06.2015, by order of 11.06.2015.

13. In the present arbitration case, the Requesting Party seeks to have the Arbitral Tribunal declare the illegality of the act of additional assessment of Stamp Tax No. 2014..., from which results a levy of €6,250.00 plus compensatory interest in the amount of €704.52, totalling €7,264.52, issued by the Stamp Tax Services, dated 28.04.2014 and of Municipal Tax on Onerous Real Estate Transfers (IMT), in the amount of €66,625.00, plus compensatory interest in the total amount of €7,332.88, issued by the Financial Services of ... with reference to the acquisition, by the Requesting Parties, from company C..., SA, NIPC ..., on 29.07.2011, of fraction G of the urban property registered in the land registry of the parish of ... under article ...-G (current article ... – G of the parish of … and …), forming part of the tourist enterprise called "D…", included in the Tourist Complex "E…".

13.A. The Requesting Party supports its claim, in summary, in the following terms:

1. The act of assessment of Stamp Tax No. 2014 ..., carried out on 28-04.2014 and the act of additional assessment of IMT in question

(a) is not reasoned;

(b) is based on the improper application to the transfer at its origin of the exemption provided for in Article 20 of Decree-Law No. 423/83, of 5 December, which provides in its paragraph 1 the following: "acquisitions of real property or autonomous fractions intended for the installation of enterprises qualified as of tourist utility are exempt from sisa (current IMT) and tax on inheritance and gifts, with stamp duty reduced to one-fifth, provided that such qualification is attributed even provisionally, provided that it remains valid and the deadline for opening to the public of the enterprise is observed";

(c) the assessment of compensatory interest is illegal because the delay in the assessment of taxes cannot be attributed to it.

The requesting party alleges that the AT understands that, fundamentally from the Judgment of the Supreme Administrative Court handed down in the context of case 4424/10, of 18 October 2011, since the tourist utility referred to in that norm was requested and attributed to the company that built the enterprise, the taxpayers who acquired the properties from the said company acquired them in an already built and installed enterprise, and therefore could not benefit from the said IMT exemption.

1. Furthermore, it continues, that the AT invokes in its favor what was decided in the Judgment of the Supreme Administrative Court of 23.01.2013, in the context of case No. 968/12, in which it can be read that "where the acquisition of real property or autonomous fractions intended for the construction/installation of tourist enterprises is not at issue, but rather the acquisition of accommodation units by final consumers, even though integrated in the enterprise in question they are affected by tourist exploitation, the same cannot benefit from the exemptions provided for in Article 20, paragraph 1, of Decree-Law No. 423/83, of 5 December".

2. It further states that the correct interpretation of Article 20, paragraph 1, of Decree-Law No. 423/83, of 5 December, dictates that transfers made to the purchasers of the fractions should be included within its scope, these benefiting from the same privileged status that the legislator intended to confer on the real estate developer, with the said benefit not being limited to the latter.

3. It is the purchasers who bear the burden of the investment and, therefore, if the legislator's intention was to foster tourist activity, it makes sense that the fiscal benefit in question be extended to them.

4. In the case at hand, where a tourist complex is concerned in which each autonomous fraction constitutes a functional element (accommodation unit) forming part of the organizational unit erected for the provision of tourist exploitation services (the tourist enterprise) -, it must be concluded that the first acquisition of each of these functional elements, because intended to enable the commencement of operation of each of them and, concomitantly, of the enterprise as a whole, was still framed within the installation process of the enterprise, thus encompassing the scope of application of Article 20 of Decree-Law No. 423/83, of 5 December, given the recognized and attributed tourist utility of the enterprise in question and which covers all the functional elements that comprise it.

5. Article 20 of Decree-Law No. 423/83, of 5 December, does not grant the exemption to the constructor of the enterprise, the real estate developer or the entity that licenses and/or operates the enterprise; it is an objective exemption, directed to benefit the realization of the installation process of enterprises of tourist utility.

6. It is sufficient, therefore, that it is established that the acquired property was integrated into the installation process of an enterprise of tourist utility or was legally and economically affected by that enterprise with a view to its complete installation.

7. Installation ceases only when both the procedure relating to licensing and authorization for the performance of urban operations relating to construction is completed, as well as the procedure intended to permit or enable the operation of the enterprise, making it suitable for the performance of tourist exploitation. Consequently, the installation process of a real estate enterprise of tourist utility, as an organizational unit intended for the provision of tourism services, only ceases when, after the real estate complex is built and licensed, it is suitable for operation in the terms that allowed it to achieve the status of tourist utility, that is, when it is suitable to be affected to the activity of tourist exploitation with the quality required in the ministerial order that granted it that status.

8. In the cases of tourist enterprises in plural ownership, this presupposes not only the construction and licensing of the accommodation units that make up the real estate complex and the establishment as an organizational unit, namely the obtaining of the respective Tourist Use License, but also that these accommodation units are in a position to operate as such, which implies prior commercialization by the real estate developer, with the purchasers being those who celebrate, necessarily, exploitation contracts with a view to achieving the tourist purpose.

9. In summary, whoever acquires a fraction in a tourist complex in plural ownership, becoming a co-owner of the village, also participates in its installation, to the extent that the latter cannot be considered fully installed while the respective accommodation units are not capable of operating and being exploited due to lack of prior acquisition in this ownership regime. In this context, it concludes that the acquisition of the fraction was intended to permit the continuation of the installation process of the enterprise of tourist utility – in the case "H…" – contributing to its progressive transition to the phase of operation and exploitation, with the gradual opening to the public of its accommodation units.

10. Thus, the acquisition at issue in the present case should benefit from the exemptions from Stamp Tax (in 4/5) and IMT provided for in Article 20 of Decree-Law No. 423/83, of 5 December, because it was intended for the installation of enterprises qualified as of tourist utility.

13.B. In its Response, the AT invoked, briefly, the following:

1. As regards the lack of reasoning, it alleges that this defect does not exist, because from the inspection report, there are stated the reasons why the Tax Authority considers illegal the exemption in the context of IMT and Stamp Tax that benefited the respective transfer.

2. As regards the incorrect interpretation of Article 20 of Decree-Law No. 423/83, of 5 December, what matters to assess the application of the exemptions in question is whether the acquisition of the fraction was intended for the installation of a tourist enterprise or rather for its exploitation.

3. By exceptionally extending the exemption provided for in paragraph 1 to acquisitions in favor of the operating company, paragraph 2 of Article 20 is clear in excluding from that benefit all other transfers.

4. The acquisition made by the Requesting Parties, already at a later moment to the date of the license for use, and, consequently, after the installation phase of the tourist enterprise, is intended for commercial exploitation.

5. The AT further invokes various excerpts from the Judgment handed down by the STA on 23.02.2013, namely the following:

"possible sales of the accommodation units carried out even during the construction/installation phase of the enterprise already form part of its exploitation."

"thus, two distinct procedures stand out, although they may occur simultaneously: one relating to the practice of operations necessary to install the enterprise; another, relating to operations necessary to put it into operation and exploitation, with the sale of the projected or constructed units necessarily forming part of the second moment."

"in summary, the developers of the enterprises are solely responsible for the real estate investment, with the risk of the same falling upon them, as well as for obtaining the licenses necessary to make them suitable for operation and exploitation."

"the benefit only has justification in relation to whoever proceeds to install the enterprise and places it on the market and not in relation to all those who use and exploit it, even if through the purchase of its units."

II. PRELIMINARY MATTERS

1. The Tribunal is competent and is regularly constituted, in accordance with Articles 2, paragraph 1, letter a), 5 and 6, all of the RJAT.

2. The parties have legal personality and capacity, are parties to the proceedings and are legally represented, in accordance with Articles 4 and 10 of the RJAT and Article 1 of Ordinance No. 112-A/2011, of 22 March.

3. The case does not suffer from any nullities and no preliminary questions were raised for analysis.

4. The conditions are therefore met for the merits of the claim to be examined.

III. SUBJECT MATTER OF THE DECISION

The principal legal question at issue in the present case consists of determining the scope of application of the exemption provided for in Article 20, paragraph 1, of Decree-Law No. 423/83, of 5 December, which implies determining the meaning and scope of the norm provided therein as regards the segment "acquisitions of real property or autonomous fractions intended for the installation of enterprises qualified as of tourist utility."

IV. FACTUAL MATTERS

IV.1. Proven Facts

i. The Requesting Party acquired, from company C..., SA, NIPC ..., on 29.07.2011, fraction G of the urban property registered in the land registry of the parish of ... under article ...-G (current article ... – G of the parish of … and ...).

ii. The property was acquired for the value of €1,025,000.00.

iii. The aforementioned property is integrated in the tourist complex "E…", also known as "G…", which is formed by the set of tourist enterprises known as "F… & G… Resort", located in …, parish of …, municipality of ..., corresponding to apartment S - …, first floor front right, type T-3, being an integral part of the tourist enterprise called "D…", included in the Tourist Complex "E…", which is composed of several units/fractions - apartments, row houses and detached houses - constituted in the horizontal property regime, and by common facilities and equipment, made available to the owners and users of the Tourist Village.

iv. In the public deed of purchase and sale, the notary made mention of the exemptions from Stamp Tax and IMT provided for in Article 20, paragraph 1, of Decree-Law No. 423/83, of 5 December. (cf. affirmation of the Requesting Party in the request for arbitration, confirmed by the inspection report correction draft).

v. Pursuant to Order …/2007, of 31.07.2008, from the Office of the State Secretary for Tourism, tourist utility was confirmed, attributed provisionally, to the Tourist Complex E… / D…, of which the requesting party C..., SA is an operator.

vi. On 29.07.2011, a tourist exploitation contract was concluded between the Requesting Party, a third entity and the owner of the tourist enterprise – company C..., SA, through which the latter granted the former the right to tourist exploitation of the apartment.

vii. Pursuant to the said contract, company C..., SA (NIPC ...) undertook to provide the following services:

i. Administration of the Tourist Exploitation Program (Exploitation Program), according to which it was incumbent upon the operating entity to develop reasonable commercial efforts in promoting the apartments to potential guests, and it was also responsible for collecting all payments relating to tourist exploitation;

ii. Provision of Property Administration Services, for which the operating entity should provide general administration services, namely accounting, sales and marketing, contacts with travel agencies and/or tourism operators;

iii. Provision of Property Maintenance Services, for which the operating entity undertook to perform the routine maintenance services necessary to keep the apartments suitable for occupation by guests, in accordance with the standards described in the contract;

iv. Provision of Cleaning and Tidying Services of the apartments, for which the operating entity undertook to provide bed linen, cleaning and tidying of the apartments.

viii. Pursuant to the said tourist exploitation contract, it was incumbent upon the owners (including the Requesting Party) to equip and furnish the apartments with the standard package of furniture, fittings and equipment in accordance with the quality standards of the H..., so as to afford them the classification of 5-star tourist apartments and ensure compliance with the uniformity requirement.

ix. As regards condominium fees, management costs and reserve funds, applicable insurance premiums, auditor fees, telephone accounts, and all costs related to basic services (electricity, oil, gas, water), the contract stipulated that these would ultimately be the responsibility of the owners.

x. Also pursuant to the contract, the units should be uninterruptedly affected to tourist exploitation, although owners of the units were permitted to exercise use of their apartments, in accordance with a pre-established schedule and subject to occupation restrictions, with the exploitation regime not ceasing during the period of occupation by the owners.

xi. For making their apartments available for tourist exploitation, for the use of third parties (tourists), the owners (including the Requesting Party) had the right to receive remuneration that reflected the revenue generated by the apartment, calculated on the basis of (i) the number of units participating in the Tourist Exploitation Program; and (ii) the number of days the Unit was available for use (periods which were not of occupation by the owners), minus the amount corresponding to the costs and expenses incurred.

xii. By Service Order No. OI…, of 28.04.2014, issued by the Tax Inspection Services of the Finance Department of Faro, a partial internal inspection procedure was opened, in relation to IMT and Stamp Tax, for the year 2011 and concerning the facts described above, and, after compliance with the duty to provide prior notice, a report was drawn up, duly notified to the Requesting Party, and attached to this case, which is here fully reproduced[1].

xiii. The Requesting Party was notified of:

a. the act of additional assessment of Stamp Tax No. 2014…, from which results a levy of €6,250.00 plus compensatory interest in the amount of €704.52, totalling €7,264.52, issued by the Stamp Tax Services, dated 28.04.2014

b. by Office No. ... of 12.09.2014, the act of assessment of Municipal Tax on Onerous Real Estate Transfers (IMT), in the amount of €66,625.00, plus compensatory interest in the total amount of €7,332.88, issued by the Financial Services of ....

xiv. The notification of the IMT assessment referred to makes reference to the Inspection Report to which the Requesting Party had been subjected, referred to above, and from which the assessments resulted, and it contains the identification of the property subject to taxation, the type of tax, the enabling norm and respective values and payment dates, as well as the means of defense.

xv. In point VII of the said Report it is stated, among other things, that "the IMT and Stamp Tax in arrears, ascertained in the present inspection procedure, do not constitute a tax offense since there was no culpable behavior on the part of the taxpayer".

xvi. From the notification of the Stamp Tax assessment it is clear what type of tax, the period and year to which it refers, the means of defense available to the taxpayer and the date of analysis – 28.4.2014 – which corresponds to the date of the final Inspection Report, referred to in the previous point, as well as the amount to be paid as tax and compensatory interest, which reflect the exact values contained in that Report.

xvii. By Office No. ... of 30.03.2015, the Requesting Party was notified of a new official assessment act of IMT issued by the Deputy Head of Finance of ..., from which results the same levy of €66,625.00, but in which payment of interest was not required.

xviii. By Office No. ... of 21.04.2015, sent under registration RM … PT, the Requesting Party was notified of the revocation, by the Head of Finance, of the act referred to in the preceding point.

IV.2. Facts Not Proven

a. The total exemption from IMT and partial exemption from Stamp Tax provided for in Article 20 of Decree-Law No. 423/83, of 5 December - confirmed by the notary responsible for the deed - was a decisive element in the decision of the Requesting Party to proceed with the acquisition of the fraction identified above.

b. The acquisition of the fraction in question was intended to permit the continuation of the installation process of the enterprise of tourist utility - in the case the "H… "-, contributing to its progressive transition to the phase of operation and exploitation, with the gradual opening to the public of its accommodation units.

c. The Requesting Party invested in the acquisition of the fraction in question on the basis of confidence in the legality of the understanding sanctioned at the time by the Tax Authority and by the generality of notaries.

IV.3. Reasoning for the Factual Findings

The determination of the facts was based on the administrative record, the documents attached to the initial petition and affirmations of the Requesting Party that are not disputed by the Tax and Customs Authority.

The facts not proven are due to the absence or insufficiency of evidence regarding them, in the sense of convincing the Tribunal, beyond any reasonable doubt, of their occurrence, and it should be emphasized that the witness testimony was very clear in referring that the installation phase would have already preceded the alienation of the autonomous fraction, to the extent that the apartment acquired by the Requesting Party was already being exploited directly by the selling entity, in the period prior to its acquisition by the latter.

IV.4 Cumulation of Claims

Given the identity of the tax facts, the tribunal competent to decide and the grounds of fact and law invoked, nothing prevents, in light of Articles 104 of the CPPT and 3 of the RJAT, the cumulation of claims verified in this case.

V. APPLICATION OF LAW TO FACTS

Before proceeding to examine the merits of the case, it is necessary to rule on the request for expansion of the subject matter of the arbitral decision, formulated by the Requesting Party, in accordance with Article 20, paragraph 1, of the RJAT, in order to include in the subject matter of the Arbitral Tribunal's decision the new IMT tax assessment act, which was communicated to it by Office No. ... of 30.03.2015.

As appears from the proven facts, that said act was, subsequently, revoked by decision of the Head of Finance of ..., communicated by Office No. ... of 21.04.2015, sent under registration RM … PT.

It is true that the Requesting Party, on 08-05-2015, reported not having received the office referred to. However, and in any case, notification is merely a condition of effectiveness, and not of validity, of the notified act.

Moreover, in any case, pursuant to Article 39/1 of the CPPT, the Requesting Party must be considered notified of the revocation act in question.

Thus, and as the Requesting Party itself stated in its Motion of 24-04-2015, "the request for expansion should be disregarded as having become moot", which is decided.

The Requesting Party begins by alleging, regarding the assessments at issue in the present case, the defect of lack of reasoning.

In this respect, having examined the proven facts, it appears that:

• The notification of the IMT assessment referred to makes reference to the Inspection Report to which the Requesting Party had been subjected, referred to above, and from which the assessments resulted, and it contains the identification of the property subject to taxation, the type of tax, the enabling norm and respective values and payment dates, as well as the means of defense;

• From the notification of the Stamp Tax assessment it is clear what type of tax, the period and year to which it refers, the means of defense available to the taxpayer and the date of analysis – 28.4.2014 – which corresponds to the date of the final Inspection Report, referred to in the previous point, as well as the amount to be paid as tax and compensatory interest, which reflect the exact values contained in that Report.

In this context, it must be concluded that the duty to provide reasoning that in this case was incumbent upon the AT was fulfilled, albeit by minimum standards.

In fact, as was written in the Judgment of the STA of 06-05-2015, handed down in case 0291/13, "In cases where the law does not impose special requirements of reasoning (...) compliance with the duty to provide reasoning by the Tax Authority is assessed in light of the provisions of paragraphs 1 and 2 of Article 77 of the LGT and having regard to the purposes served by the duty to provide reasoning".

And as was written in the judgment of 23-04-2014, from the same high Court, handed down in case 01690/13, "The act will be sufficiently reasoned when the addressee, placed in the position of a normal recipient – the bonus pater familiae referred to in Article 487 paragraph 2 of the Civil Code – can come to know the factual and legal reasons that are at its origin, in a way that allows him to choose, in an informed manner, between acceptance of the act or the triggering of the legal means of challenge, and in such a way that, in the latter circumstance, the court can also exercise effective control of the legality of the act, assessing its correctness in light of its contextual reasoning."

Now in this case, having regard to the context in which the tax acts in question were issued, their content, and the position of their specific recipient, it must be concluded that the purposes served by the duty to provide reasoning have been achieved, and the recipient came to know effectively the factual and legal reasons that are at its origin, in a way that allowed him to choose, in an informed manner, between acceptance of the act or the triggering of the legal means of challenge, which he did, in such a way that, in the latter circumstance, the court can also exercise effective control of the legality of the act, which is also happening.

In this manner, and for the foregoing, it is deemed that the alleged defect of lack of reasoning should be judged as unfounded.

The principal legal question in the present arbitration case, regarding which the Tribunal was called upon to rule on whether the illegality of the act of additional assessment of Stamp Tax No. 2014…, from which results a levy of €6,250.00 plus compensatory interest in the amount of €704.52, totalling €7,264.52, issued by the Stamp Tax Services, dated 28.04.2014 and of Municipal Tax on Onerous Real Estate Transfers (IMT), in the amount of €66,625.00, plus compensatory interest in the total amount of €7,332.88, issued by the Financial Services of ... with reference to the acquisition, by the Requesting Parties, from company C..., SA, NIPC ..., on 29.07.2011, of fraction G of the urban property registered in the land registry of the parish of ... under article ...-G (current article ... – G of the parish of …and …), forming part of the tourist enterprise called "D…", should be declared.

To form its conviction, the Tribunal must determine the scope of application of the exemptions provided for in Article 20, paragraph 1, of Decree-Law No. 423/83, of 5 December, which implies determining the meaning and scope of the norm provided therein as regards the segment "acquisitions of real property or autonomous fractions intended for the installation of enterprises qualified as of tourist utility."

The concept of tourist utility is contained in Decree-Law No. 423/83, of 5 December, which defines it as "the qualification attributed to enterprises of a tourist character that satisfy the principles and requirements defined in this diploma and its regulatory provisions". Article 3, paragraph 1, of the said diploma provides that tourist utility may be attributed to various enterprises, and the same is attributed, in accordance with Article 2, by order of the member of the Government with oversight of the tourism sector, at the proposal of the Director-General of Tourism, instructed with the opinion of the Commission on Tourist Utility. Article 4 defines the prerequisites that must be evaluated in order for tourist utility to be attributed and Article 5 defines the conditions that enterprises must meet in order to benefit from tourist utility.

Article 16 of Decree-Law No. 423/83 establishes the exemptions applicable based on the attribution of tourist utility, establishing that "the proprietor companies and the operators of enterprises to which tourist utility has been attributed shall enjoy, with respect to the ownership and operation of the same, the tax benefits indicated below, in the terms established in this diploma (…)".

In accordance with Article 20, paragraph 1, of the same diploma, acquisitions of real property or autonomous fractions intended for the installation of enterprises qualified as of tourist utility are exempt from sisa and tax on inheritance and gifts, with stamp duty reduced to one-fifth, provided that such qualification is attributed even provisionally, provided that it remains valid and the deadline fixed for opening to the public of the enterprise is observed.

Pursuant to paragraph 2 of Article 28 of Decree-Law No. 287/2003, of 12 November (which reformed the taxation of property), "All legal texts that refer to the Municipal Tax on Sisa and Tax on Inheritance and Gifts, Municipal tax on sisa (...) are considered to refer to the Municipal Tax Code on Onerous Real Estate Transfers (CIMT), (...), to the tax on onerous real estate transfers (IMT) (...), respectively." Thus, the exemption in question has referred since then to IMT.

In the present case, the AT understands that, since the tourist utility referred to in Article 20, paragraph 1, was requested and attributed to the company that built the enterprise, the taxpayers who acquired the properties from the said company acquired them in an already built and installed enterprise, and therefore could not benefit from the said exemptions from Stamp Tax and IMT. In support of its thesis, the AT invokes what was decided in the Judgment of the Supreme Administrative Court of 23.01.2013[2], in the context of case No. 968/12, in which it can be read that "where the acquisition of real property or autonomous fractions intended for the construction/installation of tourist enterprises is not at issue, but rather the acquisition of accommodation units by final consumers, even though integrated in the enterprise in question they are affected by tourist exploitation, the same cannot benefit from the exemptions provided for in Article 20, paragraph 1, of Decree-Law No. 423/83, of 5 December". In the reasoning of this judgment establishing jurisprudence, the following can also be read:

"The provision thus establishes an exemption from sisa and stamp duty (reduced to one-fifth), in acquisitions of real property or autonomous fractions intended for the 'installation' of enterprises qualified as of tourist utility.

Accordingly, the question that arises is to determine which acquisitions should benefit from the exemptions from IMT and Stamp Tax provided therein: acquisitions of real property or autonomous fractions by developers with a view to constructing and installing tourist enterprises, or acquisitions of autonomous fractions (accommodation units) belonging to or integrated in already built and installed enterprises, with a view to their exploitation?

The answer to this question takes us to the problem of determining what should be understood by 'installation' of tourist enterprises.

1. Beginning with the literal wording of Article 20, paragraph 1, of Decree-Law No. 423/83, it is important to emphasize that the legislator clearly refers that only those acquisitions of real property or autonomous fractions intended for the installation of enterprises qualified as of tourist utility are exempt from sisa and stamp duty.

Which is to say that it is not a subjective exemption directed to benefit companies, whether proprietors or operators of enterprises, but rather an objective one, since it aims to benefit the activity of installation, and only companies that dedicate themselves to 'installing' tourist enterprises may require and benefit from the exemption and not also those that wish to dedicate themselves to the activity of exploitation of the same.

In fact, the legislator is very clear when it intends to benefit proprietor companies and/or operators of enterprises. This is what happens when in Article 16 of the same diploma it refers that proprietor companies and/or operators of enterprises shall enjoy with respect to the ownership and operation of the benefits indicated in letters a) to c) of paragraph 1 of the provision. Or when in paragraph 2 of Article 20 of Decree-Law No. 423/83 it extends the exemption established in paragraph 1 of the provision to "transfer in favor of the operating company, in the case of the proprietor being a financial lease company and the transfer taking place under and in accordance with the lease contract".

What has just been set out serves to demonstrate that there is no doubt that, contrary to what was stated above, in the case of the exemption in paragraph 1 of Article 20 of Decree-Law No. 423/83, the legislator wished to encompass only acquisitions intended for the 'installation' of enterprises.

As Decree-Law No. 423/83 does not contain a definition for the concept of 'installation', Article 11, paragraph 2, of the LGT, provides that we should resort to the technical legal meaning that is given to us by the legal regime of tourist enterprises.

(…)

Thus, in Article 9 of Decree-Law No. 167/97, under the heading "Installation", it can be read that "For the purposes of this diploma, installation of tourist enterprises is considered to be the licensing of the construction and/or use of buildings intended for the operation of such enterprises."

In turn, Article 9 of Decree-Law No. 55/2002 defines installation as follows: "(...) Installation of tourist enterprises is considered to be the process of licensing, or authorization for the performance of urban operations relating to the construction of buildings or their fractions intended for the operation of such enterprises".

(…)

Another fact that is important to emphasize and which is extracted from the mentioned diplomas is that the operations that are part of the concept of 'installation' are not confused with those that correspond to the concept of 'operation' and 'exploitation'.

Finally, the most recent diploma, Decree-Law No. 39/2008, of 7 March (JusNet 474/2008), which came to establish the new legal regime for the installation, operation and functioning of tourist enterprises, "proceeding to the repeal of the various diplomas that currently regulate this matter and bringing together in a single decree-law the provisions common to all enterprises", also does not contain a notion of 'installation', but clearly distinguishes between the procedure relating to the installation of tourist enterprises (Articles 5 and 6 and Chapter IV) and the operation and exploitation of the same (Chapter VII).

In particular, Article 5, under the heading "General installation requirements" (The procedure for installation of tourist enterprises is subject to a common regime, that is, a set of common requirements, as results from this Article 5, paragraph 1, and Article 23 of Decree-Law No. 39/2008, consequently, in the installation of tourist enterprises a common procedural regime stands out which is the one defined in the Legal Regime for Urban Development and Construction, with the particularities or specificities that result from Decree-Law No. 39/2008. For a detailed analysis of the general requirements for the instruction of prior information requests, licensing and submission of prior notice and the specific requirements for the installation of tourist enterprises, see LICÍNIO LOPES MARTINS, "The procedure for installation of tourist enterprises", Tourist Enterprises, CEDOUA/FDUC, Almedina, 2010, pp. 121 et seq.), establishes:

"1- The installation of tourist enterprises that involve the performance of urban operations as defined in the legal regime for urban development and construction must comply with the norms contained in that regime, as well as the technical construction standards applicable to buildings in general, in particular regarding fire safety, health, hygiene, noise and energy efficiency, without prejudice to the provisions of this decree-law and its respective regulations.

2- The location chosen for the installation of tourist enterprises must necessarily take into account the location restrictions legally defined, with a view to safeguarding the safety of persons and property in the face of possible natural and technological risks".

(...)".

The technical legal meaning that is extracted from the legislation is that the concept of installation comprises all the operations and procedures that range from the request for licensing or prior notice of urban operations, passing through the opinions and approvals of the various competent official entities, request for authorization or notice of use for tourist purposes, and obtaining the respective license (Article 30) or title of opening to the public (Article 32). In this sequence, paragraph 2 of Article 12 of Decree-Law No. 423/83 states that "the date of opening or reopening to the public is that on which the enterprise was authorized to operate by the competent authority". And the date of communication of the title of opening and operation is the relevant one to mark the beginning of the period of validity of the status of tourist utility of the tourist enterprise in question, as results in the case at hand (cf. order No. …/2011).

In other words, 'installation' emerges as a procedure that comprises the legal acts and formalities aimed at licensing (in a broad sense, comprising prior notices or authorizations, as the case may be) of the urban operations necessary for the construction of a tourist enterprise, as well as obtaining the titles that make it suitable for operation and to be exploited for tourist purposes.

After being built and with the promoters of the investment having obtained the licenses necessary to make the enterprise suitable for the exercise of tourist activity, each tourist enterprise "must be exploited by a single entity, responsible for its integral operation and level of service and for compliance with applicable legal and regulatory provisions" (paragraph 1 of Article 44 of Decree-Law No. 39/2008), and such entity is designated by the holder of the respective license for authorization of use for tourist purposes (paragraph 2 of Article 44), that is, by the promoter (cf. Chapter VII and Articles 41 et seq. of Decree-Law No. 39/2008, which establishes the rules relating to exploitation and operation).

And even if the accommodation units are occupied by their respective proprietors, it is incumbent upon the operating entity to assume the continuous exploitation of the same, and must keep them permanently in the tourist exploitation regime (Article 45 of Decree-Law No. 39/2008).

This distinction between the concepts of 'installation', on the one hand, and 'operation' and 'exploitation', on the other, is clearly apparent in the preamble of Decree-Law No. 39/2008 itself, where one can read, first of all, the concerns and innovations regarding aspects related to the licensing of enterprises, with a view to their simplification. In the same sense, DULCE LOPES (See "Legal aspects of the installation of tourist enterprises", I Portuguese-Spanish Seminars on Urban Planning, Almedina, Coimbra, 2009, pp. 225 et seq., in particular, p. 227.), in characterizing the procedure for installation of tourist enterprises, under Decree-Law No. 39/2008 and complementary legislation, explicitly states that with the mentioned diploma it was intended to achieve "(...) an adjustment of the procedure for installation of tourist enterprises to the requirements of simplification and procedural deburaucratization that animate the legislative package of the Administrative and Legislative Simplification Program (SIMPLEX)". And the said Author continues by saying that "In these terms, it is incumbent upon the municipality to license or accept prior notices of operations necessary for the installation of hotel establishments, tourist villages, tourist apartments and tourist complexes, and for this purpose, must request the opinion of Tourism of Portugal I.P. on the architecture and location of tourist enterprises not preceded by a detailed plan".

In summary, from the reading of the regime contained in Articles 5 to 6 and 23 to 40 of Decree-Law No. 39/2008, it appears that the concept of 'installation' has nothing to do with 'operation' and 'exploitation' and that the latter comprises only, as the Public Treasury refers to, the acts, operations and procedures aimed at the construction/creation of tourist enterprises.

It thus appears clear that possible sales of accommodation units carried out even during the construction/installation phase of the enterprise already form part of its exploitation. Two distinct procedures stand out, although they may occur simultaneously: one relating to the practice of operations necessary to install the enterprise; another, relating to the operations necessary to put it into operation and exploitation, with the sale of the projected or constructed units necessarily forming part of the second moment.

What has been set out leads us to conclude that when the legislator, in paragraph 1 of Article 20, uses the expression acquisitions of real property or autonomous fractions intended for 'installation' (Whether they are new, or existing but subject to remodeling, improvement or re-equipment, or that increase its capacity (Article 5 of Decree-Law No. 423/83), this concept cannot fail to be understood as referring precisely to the acquisition of real property (or autonomous fractions) for construction (when it is a matter of new enterprises (The law also covers, as was said, the acquisition of mere autonomous fractions with a view to the remodeling/installation of tourist enterprises.)) of tourist enterprises, after the respective urban operations have been duly licensed, aiming to benefit companies that dedicate themselves to the activity of promotion/creation of the same.

This same conclusion is what results from the reading of what was established by the Working Group created to reassess the tax benefits which, with respect to the tax benefits for tourist utility in the context of IMT, Stamp Tax and IMI, recommend their suppression, because, among other things, "the promoters of investments in the tourism sector maintain, in addition to financial support framed within the economic policies of the Portuguese State and the European Union, access to general investment incentives and benefits for inland regions. On the other hand, minimizing the impact of the measure in the context of IRC, directly or through the increase in depreciations and amortizations, the costs arising from IMT and IMI on investments that remain subject to these taxes" (See Reassessment of Tax Benefits, Notebooks on Tax Science and Technique, No. 198, p. 294.).

It is apparent from the Working Group's considerations that the legislator intended to boost tourist activity by providing for the exemption/reduction of payment of Sisa/Stamp Duty, for promoters who wish to construct/create establishments (Many promoters before acquiring the properties where the tourist enterprise will be installed in the future, elaborate the project and apply for the attribution of tourist utility provisionally (Article 7 of Decree-Law No. 423/83), which will allow them to benefit from the exemption from IMT and reduction of Stamp Tax with respect to the acquisition of the property. On the other hand, promoters who pay tax on the acquisition of properties intended for the installation of tourist establishments may, later, request reimbursement when they are recognized as having tourist utility.) (or readapt and remodel existing fractions) and not when it is a matter of the mere acquisition of fractions (or accommodation units) integrated in enterprises and intended for exploitation, even if they are acquired at a date prior to the installation/licensing of the enterprise itself (As we have seen, in fact, nothing prevents the promoter of the investment from starting to sell the future fractions or units even before the construction of the enterprise and its installation.)

In truth, when individuals acquire the fractions they do so, as it appears obvious, as consumers of a tourist product that was placed on the market by the promoter with a view to exploitation, for, as we have seen, the celebration of promise of purchase and sale contracts is accompanied by the celebration of the exploitation contract. The objective that moves individuals is the realization of their own investment, and they may also choose to be users of the enterprise or cede the exploitation, participating in the results of the same (cf. paragraph 4 of Article 45 of Decree-Law No. 39/2008). For although it is considered that the fractions are affected by exploitation, nothing prevents the same being occupied exclusively by their respective proprietors and for an indefinite period, as clearly derives from legal provisions, such as those contained in Articles 45, paragraph 1, of Decree-Law No. 39/2008, when it expressly refers "(...) the operating entity must assume the continuous exploitation of all (...)" accommodation units "(...) even if occupied by their respective proprietors", and in paragraph 4 of the same provision, when it refers to the conditions of use of the accommodation units by their respective proprietors. In the words of DULCE LOPES (See "The Implementation of Enterprises"...cited, p. 170.), the diploma thus appears to "embrace the concept of residential tourism, since it expressly permits that proprietors of accommodation units may occupy the same or celebrate contracts relating to them, provided they do not compromise their tourist use, enjoy the obligatory services of the enterprise and pay the periodic contribution to which they are bound.

In summary, the promoters of enterprises are solely responsible for the real estate investment, with the risk of the same falling upon them, as well as for obtaining the licenses necessary to make them suitable for operation and exploitation.

It appears, in this manner, that the argument of the respondent to the effect that the benefit provided for in paragraph 1 of Article 20 of Decree-Law No. 423/83 has in view the tourist exploitation and that the beneficiaries are the purchasers of the fractions or accommodation units, has no basis either in the letter or in the purpose of the provision.

The benefit only has justification in relation to whoever proceeds to install the enterprise and places it on the market and not in relation to all those who use and exploit it, even if through the purchase of its units.

We cannot, in this manner, fail to conclude that the respondent is correct when it argues that "(...) The legislator intended to boost this activity sector, providing for exemption/reduction of payment of Sisa/Stamp Duty, subject to certain conditions, to those who will create tourist establishments, and not to those who merely acquire fractions belonging to already installed enterprises", and that this understanding or interpretation is what derives "from the historical, rational/teleological element, but also from the literal wording of the legal norms at issue".

The Requesting Party argues that the correct interpretation of Article 20, paragraph 1, of Decree-Law No. 423/83, of 5 December, dictates that transfers made to the purchasers of the fractions should be included within its scope, these benefiting from the same privileged status that the legislator intended to confer on the real estate developer, with the said benefit not being limited to the latter. However, as appears from the crystalline reasoning of the STA Judgment quoted above, to which reference is made, the requesting party is not correct, because it is only in relation to the promoters of enterprises - the sole bearers of the risk of the real estate investment and who are responsible for obtaining the licenses necessary to make the enterprises suitable to function and for the realization of their tourist function – that it makes sense to attribute the benefit of exemption both from Stamp Tax and from IMT, which is therefore not extensible to those who subsequently use or exploit it, even if through the purchase of their respective accommodation units.

On the other hand, the said legal provision makes the application of the exemptions from Stamp Tax and IMT dependent on the circumstance that the acquisitions of real property or autonomous fractions in question have as their purpose the "installation of enterprises qualified as of tourist utility", which is not the case with the acquisition made by the Requesting Party, which is already part of the operation phase of the enterprise. The conviction of this collective is based not only on the arguments of the parties, but also on the witness testimony, which was very clear in referring that the installation phase would have already preceded the alienation of the autonomous fraction, to the extent that the apartment acquired by the Requesting Party was already being directly exploited by the selling entity, in the period prior to its acquisition by the latter.

The Requesting Party further argues that the principles of legal certainty and legal certainty are at stake as a result of the acquisition having been made in light of information from the selling entity and confirmed by the notary when it executed the deed and by the Registrar of Land Deeds.

Indeed, the deed declares the transfer of the property exempt from payment of Stamp Tax and IMT, in accordance with the provisions of Article 20 of Decree-Law No. 423/83, of 5 December (see, letters C) of paragraph 19.1.). Pursuant to Article 49 of the IMT Code, the intervention of the notary and the registrar aims solely at the control of the tax regularity of the situations in which they intervene, and they are bound by various obligations of cooperation with the AT. Only the AT has competence to pronounce itself, in particular under Article 68 of the LGT, on the tax situation of taxpayers and on the prerequisites of tax benefits.

However, the fact that the deed declares the transfer of the property exempt from payment of Stamp Tax and IMT does not prevent the AT from issuing a tax assessment act regarding the same tax in the case of having concluded that, in accordance with the applicable legal norms, that tax benefit had been improperly recognized.

As was referred to in the Judgment of the STA of 25-03-2015, handed down in case 01080/13:

"III - Where, as in the case at hand, there is a situation of non-delivery of stamp tax on the part of the entity replaced, due to error of the replacing entity Notary, the only materially correct solution is to hold the replaced entity liable for the tax, relieving the replacing entity of any responsibility, provided that the latter has employed in the task of collection the diligence that should be expected from it.

IV - The additional assessment of stamp tax due at the time of a public deed of sale which did not occur because the notary considered that there was an exemption, (...) must be required from the entity that signed the deed who acquired the goods."

In summary, where the acquisition of real property or autonomous fractions intended for the construction/installation of tourist enterprises is not at issue, but rather the acquisition of accommodation units by final consumers, even though integrated in the enterprise in question they are affected by tourist exploitation, the same cannot benefit from the exemptions provided for in Article 20, paragraph 1 of Decree-Law No. 423/83."

The allegation of the Requesting Party is not capable of altering the conclusion formed, according to which, by force of the principles (generic, since no specific norm was invoked in its support) of good faith and the protection of reliance, the assessments at issue in the present case should be disregarded.

In fact, and in the first place, having examined the proven and unproven facts, it appears that there is no factual support for such an assertion.

Without prejudice, it will always be said that, even if it were not so, the tax acts specifically at issue in the present case would always be legal, to the extent that they are strictly in accordance with what is prescribed by law.

Thus, the protection of the position of the Requesting Party based on those principles would always have to be sought in the context of a claim for damages brought separately and based on the responsibility of the administration (for lawful acts), if, and to the extent that, the legal requirements were met that would allow its granting. In fact, in the factual framework outlined by the Requesting Party, the harmful conduct of the Requesting Party would be located, not in the tax acts practiced in obedience to the Law, but in the prior conduct allegedly generating a reliance and good faith subsequently breached.

The Requesting Party finally alleges the illegality of the assessment of compensatory interest, because, with respect to the same, in its opinion, the prerequisites referred to in Article 35/1 of the LGT would not be met.

This latter normative provides that: "Compensatory interest is due when, due to a fact attributable to the taxpayer, the assessment of part or all of the tax due or the delivery of tax to be paid in advance, or withheld or to be withheld under the scope of tax substitution, is delayed."

As can be seen from the normative provision itself in question, it is a legal requirement for the right to compensatory interest that the assessment has been delayed due to fault of the taxpayer.

Now, in this case, such is not, in fact, demonstrated.

In fact, and in the first place, the assertion of the AT, in its respective response (cf. Article 146), that we would be dealing with a case of objective responsibility, has no foundation and is contrary to all jurisprudence produced in the matter.

In this case, the omission to assess is, in the first place, attributable to a third party (the notary), who, having the obligation to ensure the assessment of taxes, did not do so, and the Requesting Party concealed or dissimulated nothing, nor in any way hindered or made it difficult for that entity to proceed as it was obliged.

Furthermore, as appears from the proven factual matter, from the Inspection Report it is stated, among other things, that "the IMT and Stamp Tax in arrears, ascertained in the present inspection procedure, do not constitute a tax offense since there was no culpable behavior on the part of the taxpayer".

As was written in the Judgment of the STA of 22-01-2014, handed down in case 01490/13, "Responsibility for compensatory interest therefore depends on an adequate causal link between the delay in assessment and the conduct of the taxpayer, as well as the possibility of formulating a judgment of censure of its conduct (on grounds of intent or negligence)."

Thus, there being no fault, obviously compensatory interest will not be due, and therefore the respective assessment must be annulled.

VI. DECISION

In light of all that has been set out above, the Tribunal rules the claim of arbitration partially well-founded and, consequently, annuls the assessments of compensatory interest at issue in the present case.

The value of the case is set at €81,222.40 in accordance with Article 97-A, paragraph 1, a), of the CPPT, applicable by force of letters a) and b) of paragraph 1 of Article 29 of the RJAT and paragraph 2 of Article 3 of the Regulation on Costs in Tax Arbitration Cases.

The arbitration fee is set at €2,754.00 in accordance with Table I of the Regulation on Costs in Tax Arbitration Cases, to be borne by the parties in proportion to their respective default, in accordance with Articles 12, paragraph 2, and 22, paragraph 4, both of the RJAT, and Article 4, paragraph 4, of the said Regulation, with €272.65 being charged to the AT and €2,481.35 being charged to the Requesting Party.

Notify accordingly.

Lisbon, 23 June 2015

The Arbitrators

José Pedro Carvalho

André Bacelar Gonçalves

Guilherme W. d'Oliveira Martins

[1] The necessary legal notifications of this decision must accompany all mandatory notifications thereof, except those to the parties, who have personal knowledge thereof.

[2] An understanding already endorsed by several decisions handed down by this Centre of Arbitration, such as 102/2014-T, 104/2014-T, 105/2014-T, 109/2014-T, 110/2014-T, 302/2014-T and 342/2014-T.