Process: 730/2015-T

Date: June 14, 2016

Tax Type: IMT Selo

Source: Original CAAD Decision

Summary

Arbitral Decision 730/2015-T addresses the controversial application of Article 236 of Law 83-C/2013 to real estate investment funds (FIIAH). The case involves IMT and Stamp Duty assessments on properties acquired by Fund B before January 1, 2014. The claimant, as fund manager, challenged the assessments arguing unconstitutional retroactivity under Article 103(3) of the Portuguese Constitution. The central dispute concerns whether Article 236's transitional provision—which applies the new FIIAH tax regime to pre-2014 acquisitions and counts the mandatory three-year holding period from January 1, 2014—unlawfully revokes previously crystallized tax exemptions. The claimant contends that IMT and IS exemptions under Article 8(7)(a) and 8(8) of the FIIAH Tax Regime were definitively acquired when properties entered the fund, as these are single-obligation taxes with no original lapse conditions. The retroactive imposition of new lapse conditions constitutes unconstitutional retrospective taxation. The Tax Authority raised a preliminary jurisdictional exception, arguing the Arbitral Tribunal lacks competence to declare legislative unconstitutionality. This decision examines the limits of arbitral jurisdiction in tax matters, the constitutional protection against fiscal retroactivity, and whether transitional provisions can modify vested tax rights. The outcome significantly impacts FIIAH investments made before 2014 and establishes precedent for interpreting transitional tax regimes affecting previously exempted transactions.

Full Decision

ARBITRAL DECISION

I – REPORT

1.1. A... – ..., S.A., with registered office at Avenue ..., no. ... – ..., ...-... Lisbon, and with the TIN ... (hereinafter referred to as the "Claimant") – in its capacity as managing company of the real estate investment fund "B... – Real Estate Investment Fund Closed for Residential Leasing" ("Fund B...") – faced with the assessment of IMT no. ... and the assessment of IS no. ..., presented, on 3/12/2015, a request for constitution of an arbitral tribunal and arbitral ruling, in accordance with the provisions of article 2, no. 1, letter a), of Decree-Law no. 10/2011, of 20/1 (Legal Regime of Arbitration in Tax Matters, hereinafter only referred to as "RJAT"), in which the Tax and Customs Authority (AT) is requested, aiming that it be "declared the nullity [or, if not understood as such, the voidability] of the [above-mentioned] assessments, based on the [...] unconstitutionality" of "article 236 (Transitional Norm within the scope of the Special Regime Applicable to FIIAH and SIIAH) provided for by Law no. 83-C/2013, of 31 December – insofar as it determines the application of the current Tax Regime of FIIAH "to properties that have been acquired by FIIAH before 1 January 2014, counting, in those cases, the three-year period provided for in no. 14 from 1 January 2014" – constitutes a new regime for lapse of the exemptions provided for in no. 7, letter a) and no. 8 of article 8 (Tax Regime) of the Tax Regime of FIIAH, revealing a flagrant and unequivocal violation of the principle of non-retroactivity of tax law, set forth in article 103 (Tax System), number 3, of the Constitution of the Portuguese Republic".

1.2. On 11/2/2016 the present Singular Arbitral Tribunal was constituted.

1.3. In accordance with article 17, no. 1, of the RJAT, the AT was summoned, as the respondent party, to file a reply, in accordance with the aforementioned article. The AT filed its reply on 3/3/2016, having argued for the complete inadmissibility of the Claimant's request, and having also raised an exception based on lack of jurisdiction of the Arbitral Tribunal.

1.4. The present Claimant, in a motion dated 23/5/2016, commented on the exception raised by the AT, having, in summary, considered it "inadmissible as not proven".

1.5. By order of 6/6/2016, the Tribunal deemed that, as the present Claimant had already commented on the exception raised by the Respondent – thus complying with the provisions of article 18, no. 1, letter b), of the RJAT – it was unnecessary, under article 16, letter c), of the RJAT, the meeting provided for in the aforementioned article 18 and that the case was ready for decision. In these terms, the date of 14/6/2016 was set for the delivery of the arbitral decision.

1.6. The Arbitral Tribunal was regularly constituted, is materially competent, the proceedings are not affected by defects that would invalidate them (see below, "preliminary issue") and the Parties have legal personality and capacity, being legitimate.

II – ARGUMENTS OF THE PARTIES

2.1. The present Claimant comes to allege, in its initial pleading, that: a) "the assessments [now in question] suffer from illegality due to violation of the provisions of article 103 (Tax System), number 3, of the Constitution of the Portuguese Republic and must, consequently, be declared null"; b) "the IMT is a tax of single obligation [...]. This qualification is relevant here insofar as the exemptions from IMT and IS, contained, respectively, in numbers 7, letter a), and 8 of article 8 (Tax Regime) of the Tax Regime of FIIAH, were recognized upon request, in accordance with article 10 (Recognition of exemptions) of the IMT Code, at a time prior to the entry of the relevant properties into the assets of Fund B.... In other words, at the moment when the properties – object of the Assessments – entered the assets of Fund B..., the exemptions from IMT and IS provided for, respectively, in numbers 7, letter a), and 8 of article 8 (Tax Regime) of the Tax Regime of FIIAH were definitively crystallized in the tax legal order"; c) "indeed, the fact subject to taxation is, both in the case of IMT and in the case of IS, the acquisition of ownership of the relevant properties by Fund B.... And the exemptions from IMT and IS were not, at the date when they entered the assets of Fund B..., conditioned to the subsequent occurrence of any facts or circumstances nor, furthermore, subject to any regime of lapse"; d) "not being [...] legally provided for, at the moment of recognition of the exemption, any facts or circumstances on which the lapse of the recognized exemption depended, it is manifest that the subsequent imposition of those facts or circumstances on exemptions crystallized in the tax legal order of the Claimant suffers from unconstitutionality, due to violation of the principle of non-retroactivity of tax law, enshrined in article 103 (Tax System), number 3, of the Constitution of the Portuguese Republic"; e) "article 236 (Transitional Norm within the scope of the Special Regime Applicable to FIIAH and SIIAH) of Law no. 83-C/2013, of 31 December, by extending the application of the current Tax Regime of FIIAH «to properties that have been acquired by FIIAH before 1 January 2014, counting, in those cases, the three-year period provided for in no. 14 from 1 January 2014» - is violating in a direct and unequivocal manner the principle of non-retroactivity of tax law constitutionally enshrined. In effect, the extension enshrined there configures a new regime of lapse of the exemptions provided for in numbers 7, letter a) and 8 (Tax Regime) and not a mere densification of a previously provided criterion"; f) "in the case sub judice there are no doubts whatsoever that the tax facts that the new law intends to regulate have already produced all their effects under the old law"; g) "it is necessary here to clarify whether the unconstitutionality now alleged by the Claimant should have as a consequence the voidability or the nullity of the Assessments [...]. [...]. Considering that the principle of fiscal non-retroactivity has the character of a fundamental right, endowed with the legal regime protective of this right, its disrespect originates the nullity of the act, in this case, the nullity of the Assessments"; h) "the admissibility of challenging the defect of nullity without dependence on a time limit does not preclude the jurisdiction of the Arbitral Tax Tribunal, in particular, by literal interpretation of article 10 (Request for constitution of the arbitral tribunal) of the RJAT. Indeed, the aforementioned article 10 (request for constitution of the arbitral tribunal) of the RJAT should not be interpreted in the sense of being exclusively applicable to situations in which acts whose challenge is subject to a time limit are involved"; i) "without conceding and merely as a precaution of representation, admitting, alternatively, that the defect (illegality) of the Assessments determines their voidability (and not nullity), the Assessments should be voided accordingly, in accordance with articles 10, no. 1, letter a), of the RJAT and article 102, no. 1, letter a), of the Code of Tax Procedure and Process."

2.2. By the foregoing, the present Claimant seeks, in summary: "(i) [that] the nullity of the Assessments be declared based on their unconstitutionality; alternatively, if not understood as such, the Assessments be voided"; "(ii) be reimbursed [...] for the entire amount paid by force of the Assessments subject to this request for arbitral ruling, plus, in accordance with article 43 (Unjust payment of tax obligation) of the General Tax Law, the compensatory interest that is due until the date of such reimbursement."

2.3. For its part, the AT comes to allege, in its reply, that: a) "the Arbitral Tribunal does not have jurisdiction to assess or declare the constitutionality or unconstitutionality of article 236 of Law 83-C/2013, of 31 December, as the Claimant fundamentally intends"; b) "jurisdiction for abstract review of legality and constitutionality is reserved to the Constitutional Court as established in article 281 of the CRP"; c) "the Arbitral Tribunal is incompetent to carry out an abstract review either of the legality or of the constitutionality of article 236 of Law 83-C/2013, of 31 December"; d) "the incompetence of the Arbitral Tribunal to proceed with abstract assessment of constitutionality constitutes a dilatory exception that prevents the continuation of the proceedings, leading to absolution of the instance regarding the claim in question, in accordance with the provisions of article 576/1 and 2 and article 577-a) of the CPC, applicable ex vi of article 29/1-e) of the RJAT"; e) "the Claimant alleges that the impugned assessments offend the fundamental content of a right and as such are null in accordance with the provision in letter d) of no. 2 of article 133 of the CPA in the wording in force at the date of the facts"; f) "the Supreme Administrative Court has pronounced itself in the sense that acts that offend the essential content of a fundamental right are those that contend with the rights, freedoms and guarantees of citizens"; g) "[...] and, in accordance with jurisprudence emanating from this court, tax acts that contend with the principle of legality are voidable, but not null. [...]. From the foregoing it thus results that the impugned assessments do not offend the essential content of a fundamental right, and even if there were any defect, it should be sanctioned with voidability and not with nullity"; h) "the Claimant considers that the impugned assessments are illegal, because, in its view, article 236 of Law 83-C/2013, of 31 December, which approved the state budget for 2014, is unconstitutional due to violation of article 103 of the Constitution of the Portuguese Republic"; i) "it thus results clearly [from the amendments introduced by article 236 of the Law that approved the 2014 State Budget and that amended the special temporary regime applicable to FIIAH] that from 1 January 2014 the IMT exemption of real estate integrated in the Fund for the purpose of leasing was extended until 2015, however, for the purpose of compliance with the requirement of allocation of the real estate to housing, proof of the existence of a contract for permanent residential leasing began to be required"; j) "the aforementioned law regulated the application in time of the amendments introduced in the following terms, having established that these amendments apply: a) To properties that have been acquired by FIIAH from 1 January 2014; b) To properties that have been acquired by FIIAH before 1 January 2014 and the three-year period counts from 01.01.2014; that is, the law establishes a transitional period for application of the amendments so that the new requirement established in the law is only assessed for the future. A different situation would be if the legislator had not enshrined this transitional period causing all ongoing exemptions to lapse that did not prove they had the legal requirements"; l) "the Claimant considers that it is not legitimate for the legislator to subsequently impose any facts or circumstances that determine the lapse of the right to exemption in accordance with the principle of non-retroactivity of tax law. It is important to first note that the law did not establish any new requirement, but only granted a period for compliance with that requirement. A period that only begins after the entry into force of the new law"; m) "it is therefore not a matter of altering the requirements, conditions for allocation or recognition of a tax benefit, but only and solely, regulating the period of time for the purpose of proving compliance with a requirement previously established"; n) "in accordance with the constitutional principle of non-retroactivity of taxes, tax norms apply to facts subsequent to their entry into force, in consonance with the general principle of application of laws in time according to which, in the absence of express attribution of retroactive effect, the law only disposes for the future (article 103, no. 3, of the CRP; article 12, no. 1, of the LGT; article 12, no. 1, of the Civil Code). Now, as is verified in the case at hand, the counting of the three-year period referred to in the new law for the conclusion of the leasing contract only occurs after the effectiveness of the new law"; o) "there is no situation of retroactivity of tax law in the case at hand"; p) "[...] the request for payment of compensatory interest is unfounded as there is no error in the action of the requested entity, much less an error attributable to the services, thus excluding the application of article 43 of the LGT".

2.4. The AT concludes, finally, that "the exceptions raised should be judged well-founded [exception of lack of jurisdiction], or, if not decided as such, the present arbitral action should be judged inadmissible, absolving the Respondent entity from the claim with the other legal consequences."

III – PROVEN, UNPROVEN FACTUALITY AND RESPECTIVE GROUNDS

3.1. The following facts are considered proven:

i) The present Claimant requested from the AT the assessment of IMT and IS of the acts of alienation of real estate by "Fund B...", in accordance with the following information: property U-...-L, located at Street ..., Development..., Plot ... – ...Esq., registered in the urban property matrix of the parish of ..., …; IMT assessment no. ... and IS assessment no. ..., in the respective amounts of €5049.03 and €1509.96 (summed, they correspond to the amount now in question: €6558.99) – see Doc. 1.

ii) The property now in question was acquired benefiting from the IMT and IS exemptions contained, respectively, in no. 7, letter a), and no. 8 of article 8 of the special regime applicable to FIIAH (which were recognized upon request, in accordance with article 10 of the IMT Code).

iii) The above-mentioned assessments were paid by the present Claimant on 27/10/2015 (see copies of the respective payment slips contained in Doc. 2).

iv) Dissatisfied with the aforementioned assessments, the present Claimant presented its request for arbitral ruling on 3/12/2015.

3.2. There are no unproven facts relevant to the decision of the case.

3.3. The facts considered pertinent and proven (v. 3.1) are grounded in the analysis of the positions exposed by the parties and the documentary evidence attached to the proceedings.

IV – PRELIMINARY ISSUE

As mentioned in the report of the present decision, the Respondent raised, in its reply of 3/3/2016, an exception based on lack of jurisdiction of the present Arbitral Tribunal. It is therefore necessary to determine whether such exception is well-founded, taking into account, also, what is stated in the motion of the Claimant of 23/5/2016, in which it comments on that exception.

The Respondent alleges, in its reply, that "the Arbitral Tribunal does not have jurisdiction to assess or declare the constitutionality or unconstitutionality of article 236 of Law 83-C/2013, of 31 December, as the Claimant fundamentally intends", since "jurisdiction for abstract review of legality and constitutionality is reserved to the Constitutional Court as established in article 281 of the CRP", and that "the Arbitral Tribunal is incompetent to carry out an abstract review either of the legality or of the constitutionality of article 236 of Law 83-C/2013, of 31 December". It concludes, from the above, that the Arbitral Tribunal is incompetent "to proceed with abstract assessment of constitutionality", an incompetence that "constitutes a dilatory exception that prevents the continuation of the proceedings, leading to absolution of the instance regarding the claim in question, in accordance with the provisions of article 576/1 and 2 and article 577-a) of the CPC, applicable ex vi of article 29/1-e) of the RJAT".

It happens, however, that, as observed from the reading of the present proceedings, the Claimant did not request the declaration of unconstitutionality or the abstract review of legality. Although the Claimant states, at the beginning of its initial pleading, that it intends to "assess whether article 236 [...] constitutes a new regime [...], revealing an unequivocal violation of the principle of non-retroactivity of tax law, set forth in article 103 [...], no. 3, of the Constitution of the Portuguese Republic", the claim made, ultimately, proves that the Claimant intends that the "nullity [or voidability] of the Assessments be declared based on their unconstitutionality", or, as the Claimant reaffirms, in its motion of 23/5/2016, "on the grounds that [the assessments in question] are based on the application of a norm that violates the Constitution and the law".

Now, while it is certain that the Arbitral Tribunal does not have jurisdiction to assess or declare the unconstitutionality of norms, it is not forbidden to it, however, either the refusal to apply any norm on the grounds of its unconstitutionality, or the application of a norm whose unconstitutionality has been raised during the proceedings. These two cases are, precisely, those that make it possible, in accordance with the provisions of articles 280, no. 1, letters a) and b), of the Constitution of the Portuguese Republic, and 25, no. 1, of the RJAT, the recourse of arbitral decisions to the Constitutional Court.

By the foregoing, it is concluded that the raised exception of lack of jurisdiction is unfounded.

V – ON THE LAW

In the case under analysis, there are two disputed legal issues: 1) to know whether the IMT and IS assessments are illegal, because carried out under article 236 of Law 83-C/2013, of 31/12, which the Claimant understands to be unconstitutional due to violation of the provisions of article 103 of the CRP (and, furthermore, null due to alleged infringement of the essential content of a fundamental right, in accordance with article 133, no. 2, letter d), of the CPA); and 2) to know whether compensatory interest is due to the Claimant.

Let us then see.

  1. The present Claimant alleges that the assessments in question are illegal because carried out under article 236 of Law no. 83-C/2013, of 31/12 (2014 State Budget) – an article that the Claimant considers unconstitutional due to violation of the aforementioned article 103 of the CRP.

In its view, "article 236 (Transitional Norm within the scope of the Special Regime Applicable to FIIAH and SIIAH) of Law no. 83-C/2013, of 31 December, by extending the application of the current Tax Regime of FIIAH «to properties that have been acquired by FIIAH before 1 January 2014, counting, in those cases, the three-year period provided for in no. 14 from 1 January 2014» – is violating in a direct and unequivocal manner the principle of non-retroactivity of tax law constitutionally enshrined. In effect, the extension enshrined there configures a new regime of lapse of the exemptions provided for in numbers 7, letter a) and 8 (Tax Regime) and not a mere densification of a previously provided criterion." From the foregoing, the present Claimant concludes that "in the case sub judice there are no doubts whatsoever that the tax facts that the new law intends to regulate have already produced all their effects under the old law".

It does not appear, however, that this is the issue at hand here.

First of all, it is convenient to observe Law no. 64-A/2008, of 31/12, which approved the special regime applicable to FIIAH. In that regime it was provided, in particular: in no. 7 of article 8, that there were exempted from IMT "acquisitions of urban properties or autonomous portions of urban properties intended exclusively for leasing for permanent housing" by the aforementioned funds; and, in no. 8 of that same article, that there were exempted from IS "all acts practiced, provided they are connected with the transmission of urban properties intended for permanent housing that occurs by force of the conversion of the right of ownership of those properties into a leasing right over them".

Law no. 83-C/2013, of 31/12, amended the wording of the aforementioned article 8, adding numbers 14 to 16, which are here reproduced:

"14 - For the purposes of the provisions in nos. 6 to 8 of the aforementioned article 8, it is considered that "urban properties are intended for leasing for permanent housing whenever they are the subject of a leasing contract for permanent housing within three years counting from the moment when they became part of the fund's assets, with the taxpayer having to communicate and provide proof to the AT of the respective actual leasing, within 30 days following the end of the aforementioned period.

15 - When properties have not been the subject of a leasing contract within the three-year period provided for in the previous number, the exemptions provided for in nos. 6 to 8 cease to have effect, with the taxpayer having to request from the AT, within 30 days following the end of the aforementioned period, the assessment of the respective tax.

16 - In case properties are alienated, with the exception of cases provided for in article 5, or in case the FIIAH is subject to liquidation, before the expiration of the period provided for in no. 14, the taxpayer must also request from the AT, before the alienation of the property or the liquidation of the FIIAH, the assessment of the tax owed in accordance with the previous number".

In article 236 of the aforementioned Law no. 83-C/2013, of 31/12, was further enshrined the following transitional norm:

"1 - The provisions in nos. 14 to 16 of article 8 of the special regime applicable to FIIAH and SIIAH, approved by articles 102 to 104 of Law no. 64-A/2008, of 31 December, apply to properties that have been acquired by FIIAH from 1 January 2014.

2 - Without prejudice to the provision in the previous number, the provisions in nos. 14 to 16 of article 8 of the special regime applicable to FIIAH and SIIAH, approved by articles 102 to 104 of Law no. 64-A/2008, of 31 December, equally apply to properties that have been acquired by FIIAH before 1 January 2014, counting, in those cases, the three-year period provided for in no. 14 from 1 January 2014".

From this it is concluded that the aforementioned Law established a transitional period for application of legal amendments, aiming, according to what the Respondent states (see §24 to 28 of the reply), to avoid the lapse of "all ongoing exemptions that did not prove they had the legal requirements". It further adds that "the law did not establish any new requirement, but only granted a period for compliance with that requirement. A period that only begins after the entry into force of the new law."

In the same sense, it highlights, for example, the arbitral decision dated 14/3/2016, delivered in proc. 398/2015-T, which states that "the obligation to allocate the property to residential leasing is not a requirement of the amendments introduced by the 2014 State Budget, but rather a requirement of the fiscal regime of FIIAH ab initio, indeed a natural consequence of the motivations that led to the creation of these funds. However, this was not the case at hand [...]. The IMT assessments carried out [...] were not based on their maintenance in the fund for a period equal to or greater than 3 years without allocation to permanent residential leasing. [...]."

Indeed, as is also stated in the arbitral decision dated 22/4/2016, delivered in proc. no. 691/2015-T: "The 2014 State Budget certainly comes to establish a new requirement for the exemption: in case allocation to permanent residential leasing does not occur within the 3-year period following the entry of the property into the fund, the fund must request the assessment of the IMT that was not assessed. However, this was not the case at hand [...]. The IMT and Stamp Tax assessments in question were not based on their maintenance in the fund for a period equal to or greater than 3 years without allocation to permanent residential leasing. [...]. In fact, the assessments at hand, as results from the assessment notes attached to the proceedings, were based on the fact that the properties were given a "purpose different from that on which the benefit was based" [see also, in the case of the present proceedings, the same description, which appears in the documents contained in Doc. 1 attached to the proceedings]. Thus, we understand that retroactivity or otherwise of the norm applied is not at issue".

In fact, it is sufficiently demonstrated that the property in question was alienated, with the consequent allocation of it to a purpose different from that for which the exemptions were granted. This is not, therefore, a matter of a time limit, as the present Claimant alleged.

In this respect, and as is also well highlighted by the arbitral decision dated 2/5/2016, delivered in proc. 689/2015-T, "the alienation of the property would always determine the lapse of the exemption by application of the provision in no. 3 of article 14 of the EBF, thus not being at issue, in the situation sub judice, any retroactive application of a norm that would introduce a new regime of lapse of the exemptions, nor is there any injury to the expectations of the Claimant or worsening of its tax position, whereby we thus understand that the IMT and Stamp Tax assessments in question are legal. The analysis of the issue raised by the Claimant regarding the alleged retroactivity of the regime provided for in article 236 of the 2014 State Budget Law is therefore foreclosed insofar as, as was demonstrated above, the conditions that gave rise to the tax assessments in question have nothing to do with the amendments originated by the aforementioned article, only with the alienation of the property and consequent allocation to a purpose different from that for which the IMT and Stamp Tax exemptions were granted."

For the reasons noted, with which we agree, it is concluded – also in the present case – that the analysis of the issue of the alleged retroactivity of the regime contained in article 236 is foreclosed, and that there did not occur, as a result of the assessments in question, unjustified injury to the expectations of the present Claimant or an unjustified worsening of its tax position. In these terms, it is consequently concluded that the IMT and IS assessments now in question should remain fully in the legal order.

It should be noted, finally, and as a final note, that, in the present case, there would never be at issue the (also alleged by the Claimant) nullity due to "infringement of the essential content of a fundamental right", since, as has been the uniform understanding of the jurisprudence of the STA, the defect of violation of law due to error in the legal requirements (which is what could be at issue here) generates mere voidability, unless the tax act were to violate the content of a fundamental right (a situation that clearly does not apply here) – which does not occur even if there has been a violation of the principles of tax legality or non-retroactivity of tax law (see, in this respect and merely by way of example, the following Judgments of the STA: no. 1709/03, of 28/1/2004; no. 1938/03, of 3/3/2004; no. 1259/04, of 22/5/2005; no. 669/05, of 9/11/2005; no. 612/05, of 23/11/2005; no. 231/13, of 26/6/2013; no. 481/13, of 26/2/2014; no. 1916/13, of 12/3/2014; no. 703/14, of 21/1/2015).

See, also, in the same sense, the following excerpt from the Judgment of the TCAN of 26/3/2015 (proc. 00354/08.0BEPRT): "The Appellant [alleges that the tax in question] is null due to [...] infringement of the essential content of a fundamental right. It follows from the provision in article 133, nos. 1 and 2, letter d), of the Code of Administrative Procedure applicable ex vi of 2, letter c), of the LGT, that acts are null to which any of the essential elements is lacking or for which the law expressly provides for that form of invalidity, in particular acts that infringe the essential content of a fundamental right. The Appellant is not correct. Acts that infringe a fundamental right must be those that contend with the rights, freedoms and guarantees of citizens; not those that merely contend with the principle of legality, as is the case in the present proceedings. [...] it is settled in the jurisprudence of tax litigation that the nullity of a norm on which an assessment act is based does not imply the nullity of the latter, generating only a situation of abstract illegality of the assessment [...] (cf. in that sense, among many others, the judgments of the STA of 25/05/2004, proc. no. 208/04, 9/11/2005, proc. 669/05, 7.05.2008, proc. no. 1034/07, of 5.07.2007, proc. no. 479/06, of 16/09/2009, proc. no. 0418/09, and of 23/10/2013, proc. no. 0579/13). Thus, the tax act that applies [allegedly] unconstitutional norms [...] does not originate the nullity of the assessment, but generates mere voidability, with a defect of violation of law due to error in the legal requirements".

  1. In accordance with article 43, no. 1, of the LGT, compensatory interest is due when it is determined, in a gracious claim or judicial challenge, that there has been an error attributable to the services of which results the payment of the tax debt in an amount higher than legally due.

It is therefore a necessary condition for the attribution of such interest the demonstration of the existence of an error attributable to the services. In that sense, see, for example, the following judgments: "The right to compensatory interest provided for in no. 1 of article 43 of the LGT [...] depends on it being demonstrated in the proceedings that this act is affected by error regarding the factual or legal requirements attributable to the AT." (Judgment of the STA of 30/5/2012, proc. 410/12); "The right to compensatory interest provided for in no. 1 of article 43 of the General Tax Law presupposes that the proceedings determine that in the assessment «there was an error attributable to the services», understood as the «error regarding the factual or legal requirements attributable to the Tax Administration»" (Judgment of the STA of 10/4/2013, proc. 1215/12).

Now, as there was no error attributable to the services, as results from what was said in 1), it is concluded that the request for payment of compensatory interest to the Claimant is unfounded.

VI – DECISION

In light of the foregoing, it is decided:

  • To judge unfounded the request for arbitral ruling, maintaining fully in the legal order the assessment acts now impugned, and absolving, accordingly, the requested entity from the claim.
  • To judge unfounded the request also insofar as it concerns the recognition of the right to compensatory interest in favor of the claimant.

The value of the case is set at €6558.99 (six thousand five hundred and fifty-eight euros and ninety-nine cents), in accordance with article 32 of the CPTA and article 97-A of the CPPT, applicable by force of the provision in article 29, no. 1, letters a) and b), of the RJAT, and article 3, no. 2, of the Regulations on Costs in Tax Arbitration Proceedings (RCPAT).

Costs charged to the Claimant, in the amount of €612.00 (six hundred and twelve euros), in accordance with Table I of the RCPAT, and in compliance with the provisions in articles 12, no. 2, and 22, no. 4, both of the RJAT, and the provision in article 4, no. 4, of the aforementioned Regulation.

Notify.

Lisbon, 14 June 2016.

The Arbitrator

(Miguel Patrício)

Text prepared by computer, in accordance with the provision in article 131, no. 5, of the CPC, applicable by remission of article 29, no. 1, letter e), of the RJAT.

The wording of the present decision is governed by the spelling prior to the Orthographic Agreement of 1990.

Frequently Asked Questions

Automatically Created

What is the scope of the Arbitral Tribunal's jurisdiction over IMT and Stamp Duty (Imposto do Selo) liquidations involving FIIAH funds?
The Arbitral Tribunal's jurisdiction over IMT and Stamp Duty liquidations involving FIIAH funds is contested in this case. Under Article 2(1)(a) of the RJAT (Legal Regime of Arbitration in Tax Matters), arbitral tribunals have jurisdiction to review the legality of tax assessments. However, the Tax Authority raised an exception arguing that the tribunal lacks competence to declare the unconstitutionality of Article 236 of Law 83-C/2013. The key jurisdictional issue is whether challenging an assessment based on alleged unconstitutionality of the underlying legislation falls within arbitral competence, or whether such constitutional review is reserved exclusively for constitutional courts. The claimant argues that Article 10 of RJAT should not be interpreted restrictively to exclude challenges based on nullity arising from constitutional violations, particularly when fundamental rights like fiscal non-retroactivity are at stake.
How does Article 236 of Law 83-C/2013 affect IMT and Stamp Duty exemptions for properties acquired by FIIAH before January 1, 2014?
Article 236 of Law 83-C/2013 establishes a transitional regime that applies the new FIIAH tax framework to properties acquired before January 1, 2014, with the critical modification that the three-year mandatory holding period begins counting from January 1, 2014, rather than from the original acquisition date. This provision directly impacts previously granted IMT and Stamp Duty exemptions under Article 8(7)(a) and 8(8) of the FIIAH Tax Regime. For properties acquired before 2014, the original exemptions had no lapse conditions attached. Article 236 retroactively introduces a lapse mechanism: if the property is not held for three years from January 1, 2014, the exemption is revoked and taxes become due. This creates significant exposure for FIIAH funds that acquired properties in 2012-2013 and disposed of them before January 1, 2017, as they face unexpected IMT and Stamp Duty assessments on transactions that were initially exempt.
Does the retroactive application of the FIIAH tax regime violate the principle of non-retroactivity under Article 103(3) of the Portuguese Constitution?
The retroactive application violates the principle of non-retroactivity under Article 103(3) of the Portuguese Constitution according to the claimant's arguments. The constitutional provision prohibits retroactive tax laws except in specific circumstances. The claimant argues that IMT and Stamp Duty are single-obligation taxes where the taxable event (property acquisition) and exemption occur simultaneously. When Fund B acquired properties before 2014, the exemptions under Article 8(7)(a) and 8(8) became definitively 'crystallized' in the legal order with no lapse conditions. Article 236 retroactively imposes new lapse conditions on completed tax facts that had already produced all legal effects under the previous regime. This is not mere regulatory clarification but substantive retroactive modification of vested tax rights. The claimant emphasizes this violates fundamental rights protected by Article 103(3), which should result in nullity of the assessments. The Tax Authority presumably contests this characterization, though its full arguments are not included in the excerpt.
What are the legal grounds for annulment of IMT and Stamp Duty assessments under the Special Regime for FIIAH and SIIAH?
The legal grounds for annulment include: (1) Primary ground - nullity of the IMT and Stamp Duty assessments based on unconstitutionality of Article 236 of Law 83-C/2013, violating Article 103(3) of the Constitution regarding fiscal non-retroactivity. Since this involves fundamental rights violations, the claimant argues it produces nullity rather than mere voidability. Nullity can be invoked without time limits under Portuguese administrative law. (2) Alternative ground - voidability of the assessments under Articles 10(1)(a) of RJAT and 102(1)(a) of the Code of Tax Procedure and Process, which allow challenging illegal tax acts. (3) The claimant also seeks reimbursement of amounts paid plus compensatory interest under Article 43 of the General Tax Law for unjust payment of tax obligations. The distinction between nullity and voidability is legally significant, as nullity provides broader temporal scope for challenge and reflects the gravity of constitutional violations.
How does the three-year deadline in Article 8(14) of the FIIAH Tax Regime apply to properties acquired before the 2014 legislative changes?
The three-year deadline in Article 8(14) of the FIIAH Tax Regime originally required fund properties to be held for at least three years to maintain tax exemptions. For properties acquired before January 1, 2014, Article 236's transitional provision controversially resets this deadline, counting the three-year period from January 1, 2014, regardless of actual acquisition date. This means a property acquired by a FIIAH fund in 2012 or 2013 must be held until at least January 1, 2017 to preserve IMT and Stamp Duty exemptions. If sold before that date—even if held for three years from actual acquisition—the exemptions lapse retroactively and taxes become due. This application transforms what was initially an unconditional exemption (under the pre-2014 regime) into a conditional one with a floating compliance period. The claimant challenges this as creating a new lapse regime rather than merely clarifying an existing one, arguing it fundamentally alters the legal framework under which investment decisions were made and completed tax obligations were satisfied.