Process: 76/2015-T

Date: November 16, 2015

Tax Type: IMI

Source: Original CAAD Decision

Summary

In Process 76/2015-T, property owners challenged IMI (Municipal Property Tax) assessments totaling €610.75 for 2013, claiming their properties qualified for automatic exemption under Article 44(1)(n) of the Portuguese Tax Benefits Statute. The properties are located in a UNESCO World Heritage Historic Centre classified as a national monument. The Tax Authority raised two defenses: first, a jurisdictional challenge arguing that CAAD lacked competence to rule on IMI exemption matters; second, on the merits, that the properties lacked individual classification required for exemption. The Tax Authority contended that while the Historic Centre itself was classified as a national monument, individual properties within the ensemble required separate classification acts under Article 56 of Decree-Law 309/2009. The Arbitral Tribunal rejected the jurisdictional exception, holding that the case concerned annulment of allegedly illegal tax assessment acts based on an objective statutory exemption, not recognition of a discretionary exemption. This distinction falls within CAAD's material competence under Article 2(1)(a) of the RJAT. The Tribunal found itself properly constituted and competent to decide the dispute. The decision established that properties are part of the UNESCO World Heritage List and certified as being in a classified national monument area. The core legal issue remained whether integration into a classified ensemble suffices for IMI exemption or whether individual property classification is mandatory. This case clarifies CAAD's jurisdiction over challenges to tax assessments involving statutory exemptions and highlights the distinction between ensemble classification and individual property classification for Portuguese tax benefit purposes.

Full Decision

ARBITRAL DECISION

Process no. 76/2015-T

Claimant: A… and B…
Respondent: Tax and Customs Authority

Municipal Property Tax ("IMI")

The arbitrator Dr. Maria Antónia Torres, appointed by the Ethics Council of the Centre for Tax Arbitration ("CAAD") to form the Single Arbitration Tribunal, constituted on 17 April 2015, hereby decides as follows:

1. REPORT

1.1. A… and B…, hereinafter referred to as "Claimants", requested the constitution of an arbitration tribunal, under Article 2, no. 1, paragraph a), and Article 10, both of Decree-Law no. 10/2011, of 20 January (hereinafter "RJAT"[1]).

1.2. The Claimants are owners of the properties located at …Street, …Municipality, registered under the property register entries nos. ... and ....

1.3. The aforesaid properties form part of the UNESCO World Heritage List relating to the Historic Centre of ....

1.4. The request for arbitral determination has as its object the declaration of illegality, and consequent annulment, of the tax assessment acts for Municipal Property Tax (IMI), in the total amount of €610.75 (six hundred and ten euros and seventy-five cents), relating to the urban properties referred to above, concerning the year 2013, and contained in the collection notices better identified in the initial petition and in the administrative process submitted by the Respondent, which are hereby considered articulated and reproduced for all legal purposes.

1.5. The Claimants further request the condemnation of the Respondent to the restitution of the amounts unduly paid, as evidenced by the payment receipts attached to the process, and that they be granted the right to compensatory interest on all amounts paid.

1.6. To support their request, the Claimants allege that the assessments subject to this petition are illegal due to violation of the tax base provision of Article 44, no. 1, paragraph n) of the Tax Benefits Statute. The Claimants consider that the Respondent made an erroneous reading of the law (of paragraph n) of no. 1, paragraph d) of no. 2 and no. 5 of Article 44 of the Tax Benefits Statute) because they understand that the requirements for automatic exemption from IMI are met in the case at hand.

1.7. The Respondent begins by presenting a defense by exception, in which it argues the incompetence of the Arbitration Tribunal to assess the matter relating to IMI exemption, requesting that the tribunal refrain from "assessing any questions relating to the evaluation of the exemption provided for in Article 44 of the Tax Benefits Statute to the specific case", considering that matters relating to the recognition of tax exemptions fall outside the tribunal's competence.

1.8. The Respondent further argues, without prejudice, that the request for declaration of illegality, and consequent annulment of the disputed assessments, should be judged unfounded, as it contends that the properties that gave rise to the assessments, and which are located in the "Historic Centre of ...", cannot benefit from the IMI exemption provided for in Article 44 of the Tax Benefits Statute, given that the properties of the claimants are not individually classified, being only certified as being integrated in the Historic Centre of ..., which is classified as a national monument.

1.9. The Respondent clarifies that from no. 1 of Article 56 of Decree-Law 309/2009, of 23.10 (procedure for classification of real property of cultural interest), it results that the individual classification of a property does not arise from its integration into an ensemble, from which it is inferred that "in a classified ensemble there may exist individually classified properties and properties that are not individually classified", and that "those that are individually classified are only the properties that were subject to an individualized classification act and specifically directed at a specific property", thus arguing for the legality of the tax acts because they constitute a correct application of the law to the facts.

1.10. The parties agreed to the waiver of statements and the meeting of the arbitration tribunal provided for in Article 18 of the RJAT.

2. PROCEDURAL MATTERS

On the exception invoked by the Respondent

2.1. The Respondent presented a defense by exception, in which it argues the incompetence of the Arbitration Tribunal to assess the matter relating to IMI exemption, requesting that the tribunal refrain from assessing any questions relating to the evaluation of the exemption provided for in Article 44 of the Tax Benefits Statute to the specific case.

2.2. The alleged incompetence of the Arbitration Tribunal derives, according to the Respondent, from the provisions of paragraph a) of no. 1 of Article 2 and of Article 4 of the RJAT, which allow the conclusion that "knowledge of matters relating to the recognition of tax exemptions does not fall within the material competence of the Arbitration Tribunal".

2.3. The Respondent states that the incompetence of the tribunal constitutes a dilatory exception of own motion knowledge according to Article 576 and paragraph a) of Article 577 of the Code of Civil Procedure applicable ex vi Article 29, no. 1, paragraphs a) and e) of the RJAT, which is hereby requested.

2.4. The Claimants, having been notified in order to, if they so wished, present a written response to the defense by exception, did so, having argued that the question at issue concerns the annulment of the IMI assessment acts, and consequent reimbursement of the unduly paid tax, a matter that is not disputed to be within the tribunal's competence.

2.5. In order to decide on the exception, the Tribunal understands that the object of the case is not a question of recognition of an exemption, but rather a question of an objective exemption, provided for by law, to which the Claimants consider themselves entitled, which was disregarded by the Respondent, resulting in the adoption of the IMI assessment acts now challenged.

2.6. Accordingly, the exception is unfounded and this Tribunal declares itself materially competent to resolve the dispute and is regularly constituted, according to Articles 2, no. 1, paragraph a), 5 and 6, no. 1, of the RJAT.

2.7. As regards the combination of plaintiffs and joinder of claims, the Tribunal considers the requirements for its admission to be met, as defined in Article 104 of the Code of Tax Procedure and Process - identity of the tax; identity of the competent body for the decision; identity of the grounds of fact and law invoked.

2.8. The parties have legal personality and capacity and are legally entitled (Articles 4 and 10, no. 2, of the RJAT and Article 1 of Regulatory Order no. 112-A/2011, of 22 March).

2.9. No procedural defects were identified in the case.

3. FACTUAL MATTERS

With relevance to the decision on the merits, the Tribunal considers the following facts to be proven:

3.1. The claimants are co-owners of the properties located at …Street, …Municipality, registered under the property register entries nos. ... and ....

3.2. The aforesaid properties of the historic centre of ... form part of the UNESCO World Heritage List, as evidenced by the document submitted by the Claimants.

3.3. The Historic Centre of ... is classified as a national monument and the Claimants submitted certificates issued by the Regional Directorate of Culture of the North relating to the classification as a national monument of the properties in question.

3.4. The Claimants were notified through the assessment notices better identified in the initial petition and in the administrative process submitted by the Respondent, which are hereby considered articulated and reproduced for all legal purposes, and proceeded to pay the IMI relating to the aforesaid properties for the year 2013.

3.5. The conviction regarding the facts taken as proven was based on the documentary evidence submitted by the Claimants, the authenticity and correspondence to reality of which were not questioned by the Respondent.

3.6. No essential facts, with relevance to the assessment of the merits of the case, which were not proven, were identified.

4. ON THE LAW

4.1. According to the provisions of paragraph n) of no. 1 of Article 44 of the Tax Benefits Statute, the following are exempt from IMI: "properties classified as national monuments and properties individually classified as of public interest or of municipal interest, under the applicable legislation".

4.2. This provision refers, namely, to the Framework Law for the Protection and Enhancement of Cultural Heritage (Law no. 107/2001, of 8 September), which establishes that immovable property may be classified as of national interest, public interest or municipal interest and specifically in the categories of Monument, Ensemble and Site.

4.3. In the specific case of the Historic Centre of ..., it is relevant that the protected heritage is seen as a whole, as an ensemble.

4.4. Now, the article sub judice refers to two realities that it treats differently. On the one hand, it establishes that urban properties classified as national monuments are exempt from municipal property tax. Nothing more. On the other hand, it also establishes an exemption from the same tax for properties individually classified as of public interest or of municipal interest.

4.5. It is our understanding that had the legislator not intended to make a distinction between properties classified as national monuments and those classified as of public interest or municipal, requiring the latter to have an individual classification, it would not have done so. But the fact is that this distinction is clear from the wording of the law.

4.6. But let us see. According to Article 15 of Law 107/2001, of 8 September:

"1 - Immovable property may belong to the categories of monument, ensemble or site, under the terms in which such categories are defined in international law, and movable property, among others, to the categories indicated in title VII.

2 - Movable and immovable property may be classified as of national interest, of public interest or of municipal interest.

3 - For immovable property classified as of national interest, whether they are monuments, ensembles or sites, the designation «national monument» shall be adopted and for movable property classified as of national interest the designation «national treasure» is created.

4 - Property is considered to be of national interest when its protection and enhancement, in whole or in part, represents a cultural value of significance to the Nation.

(...)"

4.7. The properties in question form part of the Historic Centre of ..., and were inscribed on the UNESCO World Heritage List, as declared by Notice no. 15173/2010, published in the Official Journal, II Series of 30 July 2010, issued under no. 3 of Article 72 of Decree-Law 309/2009, of 23 October.

4.8. Article 15, no. 7, of Law 107/2001 expressly states that "immovable cultural property included in the world heritage list are integrated, for all purposes and in their respective category, with property qualified as of national interest".

4.9. This is naturally the case with the properties of the Historic Centre of ..., having had their classification altered from properties of public interest, which originally appeared in Decree 67/97, of 31 December.

4.10. In light of Law 107/2001, the properties in question are today of national interest, and not of merely public or municipal interest, being consequently classified as national monuments.

4.11. Effectively, and as stated in Article 15 of Law 107/2001 and Article 3 of Decree-Law 309/2009, property classified as of national interest is designated as a "national monument", regardless of whether it is a single building, ensemble or site, and it is clear that the properties that make up the ensemble or site are covered by this classification.

4.12. The fact that individually classified properties may coexist, in the case of delimitation of an ensemble or a site, under Article 56 of Decree-Law 309/2009, only has provisional relevance for delimiting the protection zone of that property until the publication of the classification of the ensemble or site.

4.13. For this reason it is understood that Article 44 of the Tax Benefits Statute distinguishes between "property classified as a national monument" and "property individually classified as of public interest or municipal interest", only requiring individualization in relation to these last two categories, not to those of national interest properties.

4.14. We also consider that the argument that some authors advocate a restrictive interpretation of exemptions for classified properties with the aim of excluding from the benefits attributed under IMI or Transfer Tax all situations in which there has been no procedure or individual classification act as a national monument, property of public interest or municipal, does not hold.

4.15. The truth is that Article 6 g) of the Transfer Tax Code was amended in that sense by Law 55-A/2010, of 31 December, resulting in the exemption ceasing to cover "acquisitions of properties classified as of national interest, of public interest or of municipal interest, under Law no. 107/2001, of 8 September" to subsequently only contemplate "acquisitions of properties individually classified as of national, public or municipal interest, under the applicable legislation".

4.16. It happens, however, that the legislator did not amend in the same sense the tax benefits under IMI, despite having proceeded to modify the wording of Article 44 itself of the Tax Benefits Statute, with its paragraph n) continuing to require individual classification for the attribution of exemption only in the case of properties of public or municipal interest, but not making such requirement for national monuments.

4.17. Quite the contrary, the provision of no. 5 of Article 44, in the wording given to it by Law 3-B/2010, of 28 April, expressly provides that "the exemption referred to in paragraph n) of no. 1 is of an automatic nature, operating by means of communication of the classification as national monuments or of the individualized classification as properties of public interest or of municipal interest (...)". We thus consider it clear that the legislator's intention was to dispense with individualized classification for the purpose of IMI exemption for national monuments, only requiring it in relation to properties of public interest or of municipal interest.

4.18. Now, as the properties in question are integrated in the Historic Centre of ..., legally qualified as a national monument, it is evident that they benefit from the said exemption, being thus illegal the IMI assessments here challenged, and the tax paid should be reimbursed to the Claimants.

COMPENSATORY INTEREST

4.19. The Claimant petitions the condemnation of the Respondent to pay compensatory interest, provided for in Articles 43 of the General Tax Law and 61 of the Code of Tax Procedure and Process.

4.20. It is clear from the case files that the illegality of the tax assessment acts challenged is directly attributable to the Respondent, which, on its own initiative, adopted them without legal basis, suffering from an erroneous interpretation (and, therefore, application) of the legal norms to the specific case.

4.21. Consequently, the Claimant is entitled to receive compensatory interest on the amounts paid, according to the provisions of Articles 43, no. 1, of the General Tax Law and 61 of the Code of Tax Procedure and Process.

5. DECISION

In these terms:

a) The request for arbitral determination is upheld, with the consequent annulment, with all legal effects, of the IMI assessment acts better identified in the case files;

b) The reimbursement of the amount paid by the Claimants, in the sum of €610.75 (six hundred and ten euros and seventy-five cents), is ordered, plus the corresponding compensatory interest until full reimbursement of that same amount.

The value of the case is fixed at €610.75 (six hundred and ten euros and seventy-five cents), in accordance with the provisions of Articles 3, no. 2 of the Regulation of Costs in Tax Arbitration Proceedings, 97-A, no. 1, paragraph a) of the Code of Tax Procedure and Process and 306 of the Code of Civil Procedure.

The amount of costs is fixed at €306 (three hundred and six euros) under Article 22, no. 4 of the RJAT and Table I attached to the Regulation of Costs in Tax Arbitration Proceedings, at the charge of the Tax and Customs Authority, in accordance with the provisions of Articles 12, no. 2 of the RJAT and 4, no. 4 of the Regulation of Costs in Tax Arbitration Proceedings.

Let it be notified.

Lisbon, 16 November 2015

The Arbitrator

(Maria Antónia Torres)

Text prepared by computer, in accordance with Article 131, no. 5 of the Code of Civil Procedure, applicable by remission of Article 29, no. 1, paragraph e) of the RJAT.

The drafting of this arbitral decision is governed by the spelling prior to the Spelling Agreement of 1990.

[1] Acronym for Legal Regime for Tax Arbitration.

Frequently Asked Questions

Automatically Created

Are properties located in UNESCO World Heritage Sites exempt from IMI (Municipal Property Tax) in Portugal?
Properties located in UNESCO World Heritage Sites are not automatically exempt from IMI in Portugal. According to the Tax Authority's position in this arbitral decision, the exemption under Article 44(1)(n) of the Tax Benefits Statute requires individual classification of the specific property, not merely its location within a classified ensemble or UNESCO heritage area. Under Article 56 of Decree-Law 309/2009, individual classification does not automatically result from integration into a classified ensemble. Therefore, properties within UNESCO sites may only qualify for IMI exemption if they have undergone a separate, individualized classification procedure directed specifically at that property.
Does the CAAD Arbitral Tribunal have jurisdiction to rule on IMI tax exemptions under Article 44 of the Estatuto dos Benefícios Fiscais?
Yes, the CAAD Arbitral Tribunal has jurisdiction to rule on IMI exemptions under Article 44 of the Tax Benefits Statute when the case involves challenging the legality of tax assessment acts. In Process 76/2015-T, the Tribunal rejected the Tax Authority's jurisdictional exception, distinguishing between cases seeking recognition of discretionary exemptions versus cases challenging assessments where an objective statutory exemption was allegedly disregarded. The Tribunal held that annulment of tax assessment acts based on claimed statutory exemptions falls within its material competence under Article 2(1)(a) of the RJAT (Legal Framework for Tax Arbitration), as these concern the legality of administrative tax acts rather than granting new benefits.
What are the requirements for automatic IMI exemption under Article 44(1)(n) of the Portuguese Tax Benefits Statute?
For automatic IMI exemption under Article 44(1)(n) of the Portuguese Tax Benefits Statute, the property must be individually classified as having cultural interest. According to the Tax Authority's interpretation in this case, it is insufficient for the property to merely be located within a classified ensemble or heritage area. Individual classification requires a specific administrative act directed at the particular property under the procedure established in Decree-Law 309/2009. Properties integrated into classified ensembles (such as historic centres designated as national monuments or UNESCO World Heritage Sites) do not automatically receive individual classification status; separate certification is required. Property owners must obtain documentation from the relevant Regional Directorate of Culture confirming individual classification, not just integration into a classified area.
Can taxpayers claim reimbursement and compensatory interest on IMI amounts unduly paid?
Yes, taxpayers can claim reimbursement and compensatory interest on IMI amounts unduly paid. In Process 76/2015-T, the claimants requested both the restitution of €610.75 paid for the 2013 tax year and compensatory interest on all amounts paid. Portuguese tax arbitration proceedings under the RJAT allow taxpayers who successfully challenge illegal tax assessments to obtain full reimbursement of taxes paid plus compensatory interest from the date of payment until restitution. The right to compensatory interest is provided under Portuguese tax law to compensate taxpayers for the loss of use of funds improperly collected by the Tax Authority. These remedies are standard in successful tax arbitration claims and do not require separate legal proceedings.
How can property owners challenge IMI tax assessments through Portuguese tax arbitration proceedings?
Property owners can challenge IMI tax assessments through Portuguese tax arbitration by filing a request with CAAD (Centro de Arbitragem Administrativa) under Article 2(1)(a) and Article 10 of the RJAT (Decree-Law 10/2011). The process involves: (1) submitting an arbitration request identifying the contested assessment acts and legal grounds; (2) specifying the tax amounts and years in dispute; (3) providing supporting documentation such as property certificates, payment receipts, and evidence of claimed exemptions; (4) paying applicable arbitration fees. The CAAD Ethics Council appoints an arbitrator to form the tribunal. Parties may waive oral hearings by agreement. The tribunal examines its jurisdiction, reviews the administrative record, evaluates factual and legal arguments, and issues a binding arbitral decision. This alternative dispute resolution mechanism offers a faster, specialized forum compared to traditional tax courts for resolving IMI and other tax disputes.