Summary
Full Decision
ARBITRATION DECISION
I. REPORT
1.1. A… – …, S.A., with registered address at Avenida …, no. … – …, … – … …, with share capital of € 1,550,000.00, registered with the Commercial Registry of … under the single registration and tax identification number … (hereinafter "Claimant"), acting as managing entity of the real estate investment fund "B… – …" registered with the Securities Market Commission, with tax identification number … (hereinafter "Fund B…"), filed a request for arbitration and for the establishment of a Singular Arbitral Tribunal, pursuant to the provisions of article 4 and number 2 of article 10 of Decree-Law no. 10/2011, of 20 January [Legal Regime for Tax Arbitration (RJAT)], in which the Tax and Customs Authority (hereinafter designated as "Respondent") is summoned.
1.2. The Claimant requests that the Singular Arbitral Tribunal declare the annulment of the assessment of Municipal Tax on Onerous Transfer of Property (IMT) identified by the document numbered …, in the amount of €874.90, and the assessment of Stamp Tax (IS), identified by the document numbered …, in the amount of €699.92, both relating to the Property located at Rua …, no. …, …, …, Block …, …., registered in the urban property register no. …, property unit "…", of the Parish Union of ... (… and …), in both cases on the basis of their unconstitutionality, or, subsidiarily, should the Tribunal not so find, that the said assessments be annulled, and that the Respondent be condemned to reimburse the Claimant for the entire amount paid by virtue of the assessments which are the subject of the present request for arbitration, plus, pursuant to article 43 (Unduly Paid Tax Obligation) of the General Tax Law, the compensatory interest that may be due until the date of such reimbursement.
1.3. The Claimant further requests that the Arbitral Tribunal assess whether article 236 (Transitional Rule in 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, calculating, in those cases, the three-year period provided for in number 14 from 1 January 2014" - constitutes a new regime for the lapse of the exemptions provided for in number 7, paragraph a) and number 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, embodied in article 103 (Tax System), number 3, of the Constitution of the Portuguese Republic.
1.4. The request for the establishment of the Arbitral Tribunal was accepted by the Illustrious President of CAAD and immediately notified to the Respondent, on 17 February 2016.
1.4. Given that the Claimant did not proceed with the appointment of an arbitrator, pursuant to the provisions of article 6, number 2, paragraph a), of RJAT, the undersigned were designated as arbitrators by the President of the Deontological Council of CAAD, with the appointment having been accepted within the legally prescribed period and terms.
1.5. On 12 April 2016, the Parties were duly notified of this appointment, and did not express a wish to refuse the appointment of the arbitrators, pursuant to the provisions of article 11, number 1, paragraphs a) and b) of RJAT, read together with articles 6 and 7 of the Deontological Code.
1.6. In conformity with the provisions of paragraph c), of number 1, of article 11 of RJAT, the Collective Arbitral Tribunal was established on 29 April 2016.
1.7. In the Arbitration Petition submitted by itself, the Claimant invoked, in summary:
a) Number 14 of article 8 (Tax regime) of the Tax Regime of FIIAH concretely and for the first time specified the meaning of the expression "urban properties [are] intended for rental for permanent housing";
b) In the said legal provision, it was established that, for purposes of the Tax Regime of FIIAH, that "urban properties [---] intended for rental for permanent housing" are urban properties [and autonomous fractions] "that are the subject of a rental contract for permanent housing within the period of three years from the moment they entered the fund's assets".
c) The introduction of this definition of "urban properties [---] intended for rental for permanent housing" was accompanied by the specification of the circumstances in which properties that form part of FIIAH assets cease to benefit from the exemption regime provided for in numbers 6 to 8 of the Tax Regime of FIIAH (a regime for the lapse of exemptions).
d) Thus, if the properties that make up the patrimony of FIIAH have not been the subject of a rental contract within the period of 3 (three) years, counted from the date of their entry into that patrimony, the taxpayer must request from the Tax Authority, within 30 (thirty) days following the end of the said period, the assessment of the respective tax.
e) The taxpayer must likewise proceed in the case of: (i) the properties being sold by the FIIAH or (ii) the FIIAH being liquidated, in both cases, before the three-year period has elapsed, counted from the date of the entry of the relevant properties into the patrimony of the FIIAH.
f) Finally, article 236 (Transitional rule in the scope of the special regime applicable to FIIAH and SIIAH) of Law no. 83-C/2013, of 31 December (Budget Act for 2014), extended the application of the above regime "to properties that have been acquired by FIIAH before 1 January 2014, calculating, in those cases, the three-year period provided for in number 14 from 1 January 2014".
g) The amendments introduced by Law no. 83-C/2013, of 31 December (Budget Act for 2014) to the Tax Regime of FIIAH raise legitimate perplexities and questions for the managing entities of FIIAH that wish to comply with their obligations before the Tax Authority.
h) Not exhausting the issues raised, it is understood that the amendments to the Tax Regime of FIIAH assume particular relevance in the framework of taxes with single obligation, in this case, the IMT and the IS when they relate to properties that formed part of FIIAH's patrimony at the date of entry into force of Law no. 83-C/2013, of 31 December (Budget Act for 2014), that is, those covered by the aforementioned article 236 (Transitional rule in the scope of the special regime applicable to FIIAH and SIIAH).
i) The Claimant requested from the Tax Authority the assessment of IMT and IS of tax acts in light of the amendments introduced to the Tax Regime of FIIAH.
j) These tax acts referred to urban properties that formed part of the patrimony of Fund B…, at the date of entry into force of Law no. 83-C/2013, of 31 December (Budget Act for 2014), that is, those covered by the aforementioned article 236 (Transitional rule in the scope of the special regime applicable to FIIAH and SIIAH).
k) The Claimant understands, for the reasons explained below, that the Assessments suffer from illegality by violation of the provisions of article 103 (Tax System), number 3, of the Constitution of the Portuguese Republic and should, consequently, be declared null.
l) IMT is a tax with single obligation.
m) Stamp Tax, when it taxes the "onerous acquisition or by donation of the right of property or of parcellary figures of that right over immovable property, as well as the resolution, invalidity or extinction, by mutual consent, of the respective contracts - on the value" (See Item 1.1 of the General Table of Stamp Tax), is also a tax with single obligation.
n) This qualification is relevant here insofar as the exemptions from IMT and IS, contained, respectively, in numbers 7, paragraph a), and 8 of article 8 (Tax regime) of the Tax Regime of FIIAH, were recognized at the request of Fund B…, pursuant to article 10 (Recognition of exemptions) of the IMT Code, at a time prior to the entry of the relevant properties into the patrimony of Fund B….
o) That is, at the moment when the properties – subject of the Assessments – entered the patrimony of Fund B…, the exemptions from IMT and IS provided for, respectively, in numbers 7, paragraph a), and 8 of article 8 (Tax regime) of the Tax Regime of FIIAH were permanently crystallized in the tax legal order.
p) Indeed, the fact subject to taxation is, both for IMT purposes and for IS purposes, 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 patrimony of Fund B…, conditioned on the subsequent verification of any facts or circumstances, nor, moreover, subject to any regime for lapse.
q) Nothing prevents the legislator from opting for the modification of the Tax Regime of FIIAH by imposing certain conditions whose verification (or non-verification) determines the lapse of the same – as now appears to us to be the case. That is, moreover and inter alia, the regime provided for the exemption for the acquisition of properties for resale (see articles 7 (Exemption for the acquisition of properties for resale) and 11 (Lapse of exemptions), number 5, both of the IMT Code).
r) However, not being legally provided at the time 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 to exemptions crystallized in the tax legal order of the Claimant suffers from unconstitutionality, by 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.
s) Article 236 (Transitional rule in the scope of the special regime applicable to FIIAH and SIIAH) of Law no. 83-C/2013, of 31 December (Budget Act for 2014), by extending the application of the current Tax Regime of FIIAH "to properties that have been acquired by FIIAH before 1 January 2014, calculating, in those cases, the three-year period provided for in number 14 from 1 January 2014" - is violating in a direct and unequivocal manner the principle of non-retroactivity of tax law constitutionally enshrined. Indeed, the extension established therein configures a new regime for the lapse of exemptions provided for in numbers 7, paragraph a) and 8 of article 8 (Tax Regime) and not a mere specification of a criterion previously provided.
t) The violation of the principle of retroactivity now invoked takes into account the understanding that has been followed by the Constitutional Court according to which the prohibition of retroactivity, in the domain of tax law, is directed only at authentic retroactivity, embracing only those cases in which the tax fact that the new law intends to regulate has already produced all its effects under the old law; from its scope of application are excluded situations of retrospectivity or improper retroactivity, that is, those situations in which the law is applied to past facts but whose effects still persist in the present, as occurs when tax rules produce an aggravation of the taxpayer's tax position in relation to tax facts that have not occurred entirely in the domain of the old law and continue to be formed, still in the course of the same fiscal year, during the validity of the new law (e.g. judgments no. 128/2009, 85/2010 and 399/2010, all accessible at www.tribunalconstitucional.pt).
u) In the case sub judice there is no doubt that the tax facts that the new law intends to regulate have already produced all their effects under the old law.
v) According to number 1 of article 133 of the Code of Administrative Procedure in force at the time of the Assessments, "acts lacking any of the essential elements or for which the law expressly sanctions this form of invalidity" are null, and number 2 of the same provision exemplifies some situations in which this is considered verified, in particular, with "acts that offend the essential content of a fundamental right" - paragraph d) of number 2.
w) Concretely: the prevailing doctrine and the learned jurisprudence of the Supreme Administrative Court understand that not all acts that violate constitutional principles are null, only those being null that offend the essential content of a fundamental right, that is, that conflict with the rights, freedoms and guarantees of citizens, and not those that conflict with the principle of tax legality.
x) Consequently, acts that violate the principle of tax legality are voidable and not null (See MARCELO REBELO DE SOUSA, "Legal Non-existence", in DJAP, volume V, page 242).
y) Now, it is here relevant to clarify whether the unconstitutionality now alleged by the Claimant should have as a consequence the voidability or the nullity of the Assessments.
z) To that end, it is relevant to recall that the rule embodied in article 103° (Tax System), number 3, of the Constitution of the Portuguese Republic determines that "no one can be obliged to pay taxes that have not been created in accordance with the Constitution (...)".
aa) The fact that this constitutional rule has been interpreted by doctrine in the sense of establishing a right of resistance to illegal actions of the Administration is also relevant (Among others, VIEIRA DE ANDRADE, Administrative and Tax Law, in Lectures to the 3rd year of the 1992-1993 Course, Part II, page 18).
bb) Considering that the principle of non-retroactivity of tax law has the character of a fundamental right, endowed with the legal regime protecting this right (Among others, see JORGE BACELAR GOUVEIA, "The Non-retroactivity of the Tax Rule in the Portuguese Constitution", in Science and Technical Taxation, no. 387, p. 82), its disrespect gives rise to the nullity of the act, in this case, the nullity of the Assessments.
cc) There are also voices in doctrine that defend that the vice in question is legal non-existence.
dd) Now, pursuant to the provisions of article 102 (Judicial Challenge. Period for Presentation), number 3, of CPPT, when the basis of the challenge is nullity, the judicial challenge may be brought at any time.
ee) The admissibility of challenging the vice of nullity without dependence on a time limit does not remove the competence of the Arbitral Tax Tribunal, in particular, by literal interpretation of article 10 (Request for establishment of the arbitral tribunal) of RJAT (in this sense, NUNO VILLA-LOBOS and MÓNICA BRITO VIEIRA in Guide to Tax Arbitration, 2013, Almedina, pages 168 and 169). Indeed, the cited article 10 (Request for establishment of the arbitral tribunal) of 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 at issue.
ff) Admitting subsidiarily that the vice (illegality) of the Assessments determines their voidability (and not nullity), the Assessments should be annulled in conformity, pursuant to articles 10, number 1, paragraph a), of RJAT and article 102, number 1, paragraph a) of the Code of Procedure and Tax Process.
gg) The Assessments being based on article 236 (Transitional rule in the scope of the special regime applicable to FIIAH and SIIAH) of Law no. 83-C/2013, of 31 December (Budget Act for 2014), which suffer from unconstitutionality by 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, the Tax Authority should not have assessed the IMT and IS corresponding to the Assessments as requested by the now Claimant.
hh) In these terms, and in other applicable law and with the learned supplementation of the Tribunal, the Claimant requests that the nullity of the Assessments be declared on the basis of their unconstitutionality, or, subsidiarily, should the Tribunal not so find, that the Assessments be annulled, and that the Claimant be reimbursed for the entire amount paid by virtue of the Assessments which are the subject of the present request for arbitration, plus, pursuant to article 43 (Unduly Paid Tax Obligation) of the General Tax Law, the compensatory interest that may be due until the date of such reimbursement.
1.8. The Respondent presented a reply, arguing, toward the rejection of the request for arbitration, in summary, as follows:
a) Pursuant to number 2 of article 266 of CRP, the Administration is obliged to act in accordance with the principle of legality, such principle being made concrete at the infra-constitutional level in number 1 of article 3 of the Code of Administrative Procedure (CPA), which in turn determines that "The organs of Public Administration must act in obedience to law and law, within the limits of the powers attributed to it and in conformity with the purposes for which such powers were conferred upon it".
b) The Administration is subject to law and law and its organs and agents must be the first to comply with it, and cannot, therefore, be required to pronounce on the options of the legislator, for these, once embodied in law, are the normative discipline within which it exercises its attributions in pursuit of the public interest.
c) That is, bound by the principle of legality, the Tax Authority cannot, by virtue of that, disapply rules based on the interpretation it makes as to their unconstitutionality, and therefore, in short, the Tax Authority cannot refuse the application of a rule or fail to comply with the law by invoking or questioning its constitutionality, for it is subject to the principle of legality, as established in articles 266, number 2 of CRP, 3, number 1 of CPA and 55 of LGT.
d) The action of the Tax Authority could not, therefore, be different.
e) What, as will be seen below, has repercussions, particularly regarding the request for compensatory interest.
f) It is important to note that, whether the learned Tribunal comes to subsume the alleged vice to the concept of nullity or voidability, the truth is that, in any case, the request is manifestly unfounded, as better explained below.
g) The vice pointed out, by alleged violation of article 103 of CRP, does not generate nullity.
h) Indeed, the sanction that falls on an invalid administrative act is its voidability (article 135 of the [former] CPA), nullity only occurring when it lacks one of its essential elements or when the law expressly sanctions it with this form of invalidity (article 133 of the [former] CPA).
i) This choice of the legislator is perfectly understandable if we note that the regime of nullity (which generates absolute incapacity to produce effects and the possibility of its judicial challenge at any time) must be reconciled with the principles of certainty and stability, fundamental in administrative activity and relations, so as not to undermine the effectiveness and security of this activity of the administration with its administrated.
j) However, even if the violation of the normative invoked by the Claimant is verified, particularly, article 103, number 3, of CRP, the fact is that, as said, the acts challenged are only subject to annulment and never to their declaration of nullity.
k) And thus because, considering that the legal provision of paragraph d), of number 2 of article 133 of CPA is only extensible to the violation of rights, freedoms and guarantees of Title II of Part I of CRP, the case in hand has no legal framework here – in this sense, see judgment of TCAN, of 03/02/2012, case: 00473/09.6BEPNF.
l) The judgment of the STA, of 03/03/2004 (case: 01938/03) also understood it thus:
"In these terms, using the above-mentioned doctrine and the exemplary indication that is found in number 2 of the cited article 133 of CPA, we can affirm that the sanction of nullity should be applied to administrative acts that, because they lack their constitutive elements, only formally have that appearance and to all those that are offensive of the rights, freedoms and guarantees constitutionally enshrined – see paragraph d), of number 2, of article 134 of CPA and Judgment of 26/9/01 (rec. 43.832)".
m) Being that, when there is at issue the violation of fundamental rights that do not meet the "hard core", nor can it be framed in the so-called analogous rights, any violation thereof does not generate nullity, but rather mere voidability – see judgment of TCAN, of 03/07/2013, case: 01795/10.9BEBRG.
n) Should doubts subsist, note that, concretely with respect to the non-retroactivity of tax law, it is already the understanding of jurisprudence that any violation of such principle does not imply disrespect for constitutional rules directly applicable and binding, such as those referring to rights, freedoms and guarantees (see article 18, number 1, of CRP) - see Judgment of STA of 21-01-2015, delivered in case no. 0703/14.
o) Finally, it is also necessary to clarify that the doctrinal citation contained in the arbitration petition, by reference to the regime underlying article 204, number 1, paragraph a) of CPPT [with the heading "grounds for opposition to fiscal execution"], is manifestly decontextualized, not resulting therefrom any understanding coincident with the "nullity thesis" now defended by the Claimant, this being because, noting not only the short excerpt brought to the proceedings by the Claimant, but in the clarification of Jorge Lopes de Sousa to that effect, it is evident from the outset that it is not possible to allege the vice of unconstitutionality at any time, as the Claimant intends.
p) Indeed, properly contextualized the citation indicated by the Claimant, which is reproduced below, it follows that, even with respect to unconstitutionality, it is not a vice liable to be invoked at any time, for the maximum period that is legally fixed is the period for making opposition to fiscal execution (See JORGE LOPES DE SOUSA, Code of Procedure and Process Annotated and Commented - vol. II, 6th ed., Áreas Publisher, pages 158 and 159, annotation to article 102 of CPPT).
q) But more, for it is important to note that, as the Illustrious Counselor mentions in annotation to article 124 of CPPT, the assessments being paid, as is the case in the situation sub judice (see document no. 4 of the arbitration petition), it is not possible even the application of any extension of the period (that is, the allegation of unconstitutionality within the period for making opposition to fiscal execution) [See Code of Procedure and Process Annotated and Commented - vol. II, 6th ed., Áreas Publisher, pages 332 and 333].
r) In short, given all the above, particularly bearing in mind the cited jurisprudence, it is to be concluded that, even if the vice imputed to the assessments in question exists, it never generates nullity, but only voidability.
s) What, as will be explained, also does not occur.
t) As is demonstrated below, the assessments in question being based on the fact that the immovable property was given "a purpose different from that which was the basis of the benefit" (see article 5 above), then, contrary to what the Claimant wishes, not only is there no question of retroactivity of the legal rule better identified by it in the preamble of the arbitration petition, but also there is no lesion of its expectations.
u) First, it must be noted that, at the date of creation of the tax regime applicable to FIIAH, with Law no. 64-A/2008, of 31 December, the exemptions in question, both for IMT purposes and for Stamp Tax purposes, required, respectively:
(i) that the acquisition of the immovable properties have as exclusive purpose the "rental for permanent housing" and,
(ii) that the transmission have as object "properties intended for permanent housing that occurs by virtue of the conversion of the right of property of these immovable properties into a right of rental on the same, as well as with the exercise of the option to purchase provided for in number 3 of article 5".
v) That is, the taxpayers who wished to benefit from the said exemptions always had, from the beginning of the tax regime applicable to FIIAH, to comply with the requirement that such properties be intended exclusively for rental for permanent housing.
w) Therefore, the Claimant is wrong when it affirms that the exemptions in question were not conditioned by any facts or circumstances, and, consequently, the argument it constructs starting from such erroneous premise is equally marred by error.
x) After all, the new wording introduced by Law no. 83-C/2013, of 31 December, in favor of legal certainty and the principle of protection of confidence, and in the spirit of the legislator, when creating the regime, merely came to specify the criterion already required, stipulating "that urban properties are intended for rental for permanent housing whenever they are the subject of a rental contract for permanent housing within the period of three years from the moment they entered the fund's assets".
y) It is to be concluded, thus, that, with the amendments introduced, the ratio of the established exemptions was not altered, and it is to be underlined that the immediate extinction of the benefit was not determined in the case of the said rental contract not being entered into, for a very broad period of three years was granted for that purpose. All the more so because such amendments took care to respect the principle of legal certainty and protection of confidence.
z) Being certain that, in any case, given the sale of the properties pending the year 2015, it is unequivocal that the Claimant could not, in any way, benefit from the exemption requested.
aa) However, according to the Claimant, the unconstitutionality by violation of the principle of non-retroactivity of tax law would arise from the segment of article 236, number 2, of Law 83-C/2013, of 31 December, in determining the application of the amendments introduced "to urban properties that have been acquired by FIIAH before 1 January 2014, calculating, in those cases, the three-year period provided for in number 14 from 1 January 2014".
bb) In truth - and noting that it is not identified what legal lesion the said rule caused to the Claimant, given that, as seen, the sale presupposes the dedication to a purpose distinct from rental - given the provision of the cited normative precept, with respect to properties acquired before 1 January 2014, in order to be considered the dedication for permanent housing realized, rental contracts for permanent housing would have to be entered into in the three subsequent years.
cc) Whereby it is easily inferred that the exemptions in question did not simply cease to be in force: what occurred was only that criteria were established to specify a legal requirement provided in an indeterminate manner. Necessity for legislative intervention which is understood, given that, as results from article 2, number 1, of EBF, tax benefits are exceptional character measures instituted for the protection of relevant extrafiscal public interests that are superior to the taxation they prevent.
dd) On the other hand, and contrary to what the Claimant seems to believe, it is to be noted that the cessation of a tax benefit can always take place, for example, if it is found, in a concrete case, by means of inspection, that the respective requirements are not met.
ee) Indeed, pursuant to article 7, number 1, of EBF:
"All persons, natural or legal, of public or private law, to whom tax benefits are granted, automatic or dependent on recognition, are subject to inspection by the Tax and Customs Authority, the Regional Directorate of Tax Affairs and other competent entities, to control the verification of the requirements of the respective tax benefits and the compliance with the obligations imposed on the holders of the right to the benefits".
ff) Being that, as follows from article 14, number 1, of EBF, "the extinction of tax benefits has as a consequence the automatic restoration of the rule of taxation".
gg) To which is added, furthermore, the provision of article 14, number 2, of EBF that:
"when the tax benefit concerns the acquisition of goods intended for the direct realization of the purposes of the acquirers, it ceases to have effect if those goods are sold or given another purpose without authorization of the Minister of Finance, without prejudice to the remaining sanctions or different regimes established by law".
hh) Therefore, all things considered and weighed, it is manifest that, from the beginning of the regime, the tax benefits in question applicable to FIIAH always depended on the dedication of the immovable properties to rental for permanent housing, legal requirement that the Tax Authority, within its powers of inspection, could always ascertain, in order to conclude for the permanence of the benefit or, rather, for the restoration of the rule of taxation system.
ii) Thus, given that there is at issue the concrete sale of the immovable properties, note that, if the lapse of the exemption occurs, already pursuant to article 14, number 2, of EBF, article 8, number 16 of the regime merely concretizes an anti-abuse measure, that is, specifying that properties that do not remain in portfolio with exclusive dedication to residential rental, were not acquired for such purpose. Limiting, furthermore, such lapse to a defined period in the law as opposed to what occurred previously, by virtue of the application of EBF.
jj) As has been well concluded in various arbitration decisions (delivered in cases nos. 398/2015-T, 688/2015-T, 689/2015-T, 709/2015-T, 710/2015-T, 729/2015-T and 735/2015-T), also in the present proceedings there is not at issue the retroactivity or otherwise of the law, nor is there lesion of the Claimant's expectations or aggravation of its tax position, for the rationale for the attribution of a tax benefit for purposes of IMT/IS to FIIAH was established clearly from the beginning: "The acquisitions of urban properties or of autonomous fractions of urban properties intended exclusively for rental for permanent housing, by the investment funds...".
kk) According to the understanding endorsed by doctrine and jurisprudence, article 103, number 3, of CRP only prohibits authentic or proper retroactivity of tax law embracing only those cases in which the tax fact that the new law intends to regulate has already produced all its effects under the old law, excluding from its scope of application situations of retrospectivity or improper retroactivity, that is, those situations in which the law is applied to past facts but whose effects still persist in the present, as occurs when the law is enacted by the end of the year to which the tax corresponds (judgment of the Constitutional Court no. 399/2010).
ll) Indeed, it is true that the tax fact for purposes of IMT or Stamp Tax, for what now matters, occurs at the time of acquisition of the immovable property.
mm) However, this does not mean that, in the case in hand, it can be concluded for the existence of a circumstance of retroactivity for the new law did not simply come to determine, and without further, that previously acquired immovable properties be subject to taxation for purposes of IMT and Stamp Tax.
nn) What the new law came to do, rather, was merely to specify criteria already provided in the old law, in particular:
(i) the concept of dedication to rental for permanent housing, stipulating a more than sufficient period for taxpayers to be able to adapt, gathering an unequivocal means of proof (rental contract),
(ii) as well as the clarification of the situations in which the sale of the immovable property intended for rental does not cause the lapse of the exemption pursuant to what was then provided in EBF.
oo) Terms in which, contrary to what the Claimant defends, there is no verification of the introduction ex novum of a regime for lapse of the benefit, and, even less is there any frustration of the expectations of the taxpayers or violation of the principle of non-retroactivity of tax law.
pp) With regard to the payment of compensatory interest, by all that has been said above, it is understood that the acts of assessment do not suffer from the vice that should dictate their annulment or declaration of nullity. However, and without conceding, it will always be said that, although the Claimant does not specify in what terms it petitions for the respective interest, the same is not due.
qq) Indeed, recall that the Tax Authority, as an organ of the Public Administration, does not have competence to decide on the non-application of rules with respect to which doubts of unconstitutionality are raised.
rr) Consequently, to the services of the Tax Authority cannot be imputed any error of fact or law, given the obedience to law that informs all of its activity, which, in turn determines that there is no legal basis for the request for compensatory interest.
ss) Thus, given the above, not being able to be imputed to the services of the Tax Authority error which, in itself, determined the payment of tax debt in an amount greater than legally due – since it was not in its discretion to decide differently from the way it decided – it can only be concluded in the sense that compensatory interest is not due pursuant to article 43 of LGT.
tt) In these terms, and in further applicable law, the Respondent argues that the request for arbitration should be judged unfounded as unproven, and, consequently, the Respondent absolved of all requests, with the due legal consequences. Or, should the Tribunal not so find, it requests, by appeal to the provision of article 280, number 3 of CRP and article 72, number 3 of the Law of the Constitutional Court, that notification to the Public Ministry of the arbitration decision be determined.
1.10- By order of 7 June 2016, the Tribunal, given that no exceptions had been invoked and there was no place for the production of constitutive evidence, dispensed with the holding of the meeting provided for in article 18 of RJAT, having heard the Parties, and in application of the principles of autonomy of the Arbitral Tribunal in conducting the proceedings, celerity, simplification and procedural informality. Moreover, it set 19 July 2016 as the deadline for delivery of the arbitration decision.
1.11-In terms of pleadings, the Claimant advocated, in essence, for the position it sustained in the initial petition, reinforced by the attachment of a legal opinion, and the Respondent, having also maintained in essence the position sustained in the reply, innovated by invoking the preliminary exceptions of (i) material incompetence of the arbitral tribunal to assess the "abstract illegality of the assessments" and (ii) passive illegitimacy of the Respondent, in both cases by considering that the Claimant intends for the arbitral tribunal to proceed with the abstract review of the constitutionality of the rule in question.
1.12- By Order of 04 July 2017, the Tribunal, in respect of the principle of contradictoriness, granted the Claimant a period to, if it wished, pronounce itself on the exceptions invoked by the Respondent.
1.13. The Claimant pronounced itself on the exceptions invoked by the Respondent, arguing that the same are based on an incorrect interpretation of the request for arbitration, and therefore cannot proceed.
II. PRELIMINARY MATTERS
2.1. The request for arbitration is timely, as it was presented within the period provided for in paragraph a) of number 1 of article 10 of RJAT.
2.2. The Respondent invoked, in terms of written pleadings, the preliminary exceptions of (i) material incompetence of the arbitral tribunal to assess the "abstract illegality of the assessments" and (ii) passive illegitimacy of the Respondent, in both cases by considering that the Claimant intends for the arbitral tribunal to proceed with the abstract review of the constitutionality of the rule in question.
2.3 It happens that, contrary to the understanding expressed by the Respondent, in the case sub judice it is not a matter of successive abstract review of the constitutionality of the rule in question.
2.4. The Claimant's contention is to attack the assessment acts practiced by the Respondent, requesting from the Tribunal, as its principal claim, the declaration of the nullity of these acts on the basis of their unconstitutionality or, subsidiarily, the annulment of the same.
2.5 The alleged unconstitutionality of the rule contained in article 236 (Transitional Rule in the Scope of the Special Regime Applicable to FIIAH and SIIAH) of Law no. 83-C/2013, of 31 December (Budget Act for 2014), appears as an incidental matter that it falls to the tribunal to decide, based on the provision of article 204 of the Constitution of the Portuguese Republic, should it find that this is a matter whose prior clarification is indispensable to the decision on the merits of the case.
2.6. Should there be, in the present proceedings, review of constitutionality, it will be a successive concrete review, it falling to the tribunal, within the scope of the power-duty conferred upon it in article 204 of the Constitution of the Portuguese Republic, to judge the constitutionality or unconstitutionality of the rule in question.
2.7. In the eventuality of this Tribunal judging the rule unconstitutional, the legal consequence is that of its non-application in the concrete case, and not the declaration of unconstitutionality with binding force general, which is the competence of the Constitutional Court, within the scope of a process of successive abstract review.
2.8. Given that the Claimant's contention is to attack the assessment acts practiced by the Tax Authority, it is this that must assume the position of Respondent in the present proceedings.
2.9. In this manner, the Tribunal considers itself competent to judge the constitutionality or unconstitutionality of the rule in the concrete case, as a prior condition for the decision on the merits of the case, with the Respondent having passive legitimacy in the present request for arbitration.
2.10 Thus, the preliminary exceptions invoked by the Respondent are entirely unfounded.
2.11 The parties enjoy legal personality and judicial capacity, are legitimate regarding the request for arbitration and are duly represented, pursuant to the provisions of articles 4 and 10 of RJAT and article 1 of Ordinance no. 112-A/2011, of 22 March.
2.12. The Tribunal is competent regarding the assessment of the request for arbitration formulated by the Claimant.
2.13. No nullities are verified, and therefore the merits must be examined.
III. MERITS
III.1. FACTUAL MATTER
§1. Facts Established
The following facts are established:
a) The Claimant is the managing entity of the real estate investment fund "B… – …" registered with the Securities Market Commission, with tax identification number …;
b) The Claimant requested the assessments of IMT and Stamp Tax relating to the property located at Rua …, no. …, …, …, Block …, …., registered in the urban property register no. …, property unit "…", of the Parish Union of … (… and …), in the municipality of Beja, assessments identified by the documents indicated below and in the respective amounts:
c) The assessments were made on the material ground of the sale of the immovable property described above, and in the consequent change of the purpose of the property – different from that which was the basis of the benefit;
d) The assessments were paid by the Claimant on 20 November 2015 (as per copies of the respective payment vouchers attached by the Claimant as Doc. 2);
e) The tax acts identified above referred to an urban property that formed part of the patrimony of Fund B…, at the date of entry into force of Law no. 83-C/2013, of 31 December (Budget Act for 2014).
§2. Facts Not Established
It was not established in the present proceedings that the Claimant dedicated the immovable property to which the contested assessments referred to rental for permanent housing.
§3. Reasoning on Factual Matters
With respect to the factual matters established, the Tribunal's conviction was based on the free assessment of the positions taken by the Parties in terms of facts and on the content of the documents attached to the proceedings, not disputed by the Parties.
III.2. LEGAL MATTERS
The principal matter to be decided in the case sub judice is that which relates to whether the contested assessment acts are legal or illegal, in light of the tax legal regime of FIIAH.
Incidentally, and should it prove necessary to decide the principal matter, the matter arises that relates to whether article 236 (Transitional Rule in 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, calculating, in those cases, the three-year period provided for in number 14 from 1 January 2014" - violates the principle of prohibition of retroactivity of tax law, embodied in article 103, number 3, of the Constitution of the Portuguese Republic.
III.2.1. The Evolution of the Tax Legal Regime of FIIAH
Law no. 64-A/2008, of 31 December (Budget Act for 2009), approved the special regime applicable to real estate investment funds for residential rental (FIIAH) and real estate investment entities for residential rental (articles 102 to 104 of Law no. 64-A/2008, of 31 December (Budget Act for 2009).
In its article 8, the tax regime applicable to FIIAH was established.
With respect to the Municipal Tax on Onerous Transfer of Property (IMT), the Tax Regime of FIIAH established the following in number 7 of the said article 8:
"7 — The following are exempt from IMT:
a) The acquisitions of urban properties or of autonomous fractions of urban properties intended exclusively for rental for permanent housing, by the investment funds referred to in number 1;
b) The acquisitions of urban properties or of autonomous fractions of urban properties intended for permanent own and personal housing, as a result of the exercise of the option to purchase referred to in number 3 of article 5 by the lessees of the properties that form part of the patrimony of the investment funds referred to in number 1."
For its part, pursuant to article 8, number 8, "All acts practiced are exempt from stamp tax, provided they are connected with the transmission of urban properties intended for permanent housing that occurs by virtue of the conversion of the right of property of these properties into a right of rental on the same, as well as with the exercise of the option to purchase referred to in number 3 of article 5".
Law no. 83-C/2013, of 31 December (Budget Act for 2014) added to article 8 of the Tax Regime of FIIAH numbers 14 to 16, with the following wording:
"14 - For purposes of the provisions of numbers 6 to 8, it is considered that urban properties are intended for rental for permanent housing whenever they are the subject of a rental contract for permanent housing within the period of three years from the moment they entered the patrimony of the fund, the taxpayer being required to communicate and provide proof to the Tax Authority of the respective actual rental, within 30 days following the end of the said period.
15 - When the properties have not been the subject of a rental contract within the three-year period provided for in the previous number, the exemptions provided for in numbers 6 to 8 cease to have effect, the taxpayer being required in that case to request from the Tax Authority, within 30 days following the end of the said period, the assessment of the respective tax.
16 - If the properties are sold, with the exception of the cases provided for in article 5, or if the FIIAH is subject to liquidation, before the expiration of the period provided for in number 14, the taxpayer must likewise request from the Tax Authority, before the sale of the property or the liquidation of the FIIAH, the assessment of the tax due pursuant to the previous number."
Law no. 83-C/2013, of 31 December (Budget Act for 2014) further established in its article 236 the following transitional rule:
"1 - The provisions of numbers 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 of the previous number, the provisions of numbers 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, calculating, in those cases, the three-year period provided for in number 14 from 1 January 2014."
III.2.2. The Application of Law to the Concrete Case
Since the original version of the tax legal regime of FIIAH, the exemptions provided for in numbers 7 and 8 of article 8 thereof have been conditioned on compliance with the specific requirement that the properties that benefit from them be intended exclusively for rental for permanent housing.
Being tax benefits exceptional character measures, their legitimacy is rooted in the protection of relevant extrafiscal public interests that are superior to the taxation they prevent (article 2, number 1, of EBF).
The public interest that legitimizes the exemptions provided for in numbers 7 and 8 of article 8 of the tax legal regime of FIIAH is that of the promotion of the supply of properties for rental intended for permanent housing.
Pursuant to the provision of number 3 of article 14 of the Statute on Tax Benefits (EBF), "[w]hen the tax benefit concerns the acquisition of goods intended for the direct realization of the purposes of the acquirers, it ceases to have effect if those goods are sold or given another purpose without authorization of the Minister of Finance, without prejudice to the remaining sanctions or different regimes established by law".
Now article 14 of EBF is applicable not only to tax benefits contained in EBF but also to other tax benefits (art. 1 of EBF), as was the case with the benefits provided for in the tax legal regime of FIIAH, until the date of entry into force of the amendments made to the tax legal regime of FIIAH by Law no. 83-C/2013, of 31 December.
That is, it followed from EBF that the tax benefits granted under the tax legal regime of FIIAH would cease if the conditions that were at the base of their grant ceased. Indeed, the verification of the conditions or requirements legally defined for the grant of a tax benefit are essential to ensure the legitimacy thereof in light of the constitutional principles that inform the tax system, in particular the principle of tax equality.
The amendments introduced by Law no. 83-C/2013, of 31 December, did not alter the ratio of the established exemptions, nor did they determine the immediate extinction of the benefit in the case of the rental contract not being entered into, a period of three years having been granted for that purpose.
The legislator merely introduced greater precision and certainty in the tax legal regime of FIIAH, in specification of the principle of legal certainty and protection of the confidence of citizens and in respect of the principle of proportionality.
As appears from the assessment notes attached to the proceedings, the assessments were based on the fact that the property in question was given a purpose different from that which was the basis of the benefit (as per copy of the collection notes attached to the proceedings by the Claimant).
It is not, therefore, a matter of the application of the requirement associated with dedication to a specific purpose (rental for permanent housing) within the three-year period, introduced by article 236° of the transitional regime already mentioned, but rather of the sale of a property affected to a FIIAH managed by the Claimant.
With respect to the material ground of the assessments, contained in the collection notes, the Claimant states that "in no part of such requests, whether submitted in writing or orally, does the Claimant mention having requested the assessment of the tax because it intended to give the property in question 'a purpose different from that which was the basis of the benefit, causing the lapse of the exemption', as was incorrectly indicated in a discretionary manner by the Tax Authority in the assessment document in this case". However, it does not provide proof of this assertion.
In terms of pleadings, the Claimant merely attached an exemplifying request, presented in a similar case, which does not refer to the property sub judice.
The Claimant also does not provide proof of the verification of the requirement provided for in the tax legal regime of FIIAH, concerning the purpose of the property - rental for permanent housing.
It is clear that what is at issue in the proceedings sub judice is not non-compliance with the three-year period referred to in numbers 14 to 16 of article 8 of the tax legal regime of FIIAH, in the wording introduced by Law no. 83-C/2013, of 31 December, nor its eventual retroactive application by virtue of the provision of article 236 of this law.
The contested assessments had as their ground the cessation of the condition that was at the base of the grant of the tax benefit - the dedication of the property to rental for permanent housing.
In these terms, the Tribunal understands that the assessments of IMT and Stamp Tax which are the subject of the request for arbitration do not suffer from any illegality, and therefore the request for arbitration is unfounded.
The analysis of the matter raised by the Claimant regarding the alleged unconstitutionality of the transitional rule contained in article 236° of Law no. 83-C/2013, of 31 December, is therefore prejudiced, by virtue of the same not being relevant to the decision on the merits of the case.
Given that the request for declaration of the nullity of the assessments impugned or their annulment is unfounded, the request for condemnation of the Respondent to reimburse the Claimant for the entire amount paid by virtue of the assessments which are the subject of the present request for arbitration, plus compensatory interest, is likewise prejudiced.
IV. DECISION
Terms in which this Arbitral Tribunal decides:
a) To judge the arbitration request for declaration of nullity or annulment of the contested assessments to be entirely unfounded;
b) To acquit the Tax and Customs Authority of that request;
c) To judge unfounded the request for reimbursement plus compensatory interest, acquitting the Tax and Customs Authority of the respective request.
V. VALUE OF THE PROCEEDINGS
In accordance with the provisions of article 306, number 2, of CPC, article 97-A, number 1, paragraph a), of CPPT and article 3, number 2, of the Regulation on Costs in Tax Arbitration Proceedings, the value of the proceedings is set at € 1,574.82.
VI. COSTS
Pursuant to article 22, number 4, of RJAT, the amount of costs is set at € 306.00, pursuant to Table I attached to the Regulation on Costs in Tax Arbitration Proceedings, at the charge of the Claimant.
Let it be notified.
Lisbon, 15 July 2016
The Arbitrator
(Paulo Nogueira da Costa)
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