Following the litigation that dragged on for more than 10 years and involved hundreds of cases in the Portuguese courts, the Supreme Administrative Court (STA) issued case-law stating that “the component parts of a wind farm cannot, per se, be considered as urban buildings of type “others”, insofar as they do not constitute economically independent parts, that is, they do not have sufficient aptitude to, by themselves, develop the aforementioned economic activity, being elements ad integrandum domum, without economic autonomy in relation to the whole of which they are a part”.
As a consequence, the PTA[1] revoked the previous understanding set out in Guideline 8/2013, of 10.04.2013 on the registration of wind farms in the cadastral registry [i.e. (i) unitary registration of wind turbines (foundation and tower) and substations; (ii) classification as urban buildings of type “other” since “they do not fall under the other defined types of residential, commercial, industrial or service buildings or land for construction” and (iii) use in the valuation of the cost method added of the land value] and released Guideline 2/2021, of 03.03.2021, which established the following criteria for registration and evaluation of wind farms:
– the power generation plant, as a whole, is a reality that fulfils the structural elements of the building concept (replacing the previous understanding of unitary and separate registration of the wind turbines and other components of the wind farm);
– wind and solar power plants “must be classified as industrial urban buildings based on the licensing of the constructions”;
– the fraction of territory where the wind/solar power plants are located is only part of the power generation plant if it is an asset of that entity through property, usufruct or surface rights, not integrating the power plant if it belongs to third parties even if assigned, by any title, to the entity that owns the plant;
– the evaluation must be carried out pursuant to art. 38 nº 3 and 4 of IMI[2] Code (CIMI) by the cost method added of the land value (art. 46º nº 2 CIMI);
– when evaluating wind power plants, it shall be taken into consideration the substations, control buildings and wind turbines [foundation and steel or concrete tower, excluding the set of blades, rotor and cabin (nacelle)] and the land where they are located;
– the land to be considered for the purposes of applying the cost method should correspond only to the area actually occupied by the constructions;
– the registration must be made in accordance with art. 79 and 80 CIMI[3], the building being registered in the parish where it is located. If it is located in more than one parish and is fenced, it must be registered in the parish in which it has the main entrance, if it is not fenced, in the parish where the largest number of constructions is located.
In view of the general principles of Guideline 2/2021, we anticipate that the litigation surrounding the IMI of wind farms (and solar power plants, given the similarity between the two realities for this purpose) will continue and operators will certainly have arguments to defend that registrations and subsequent IMI assessments must be (again) annulled.
Indeed, the PTA depart from the assumption that, in accordance with the case law of the STA, the requirement concerning the existence, in normal circumstances, of economic value, is not verified in relation to each of the wind turbines or any other element that composes the wind farm (since, individually, none of them is, by itself, under normal circumstances, suitable to produce and inject energy into the public network), but it is verified for the wind farm, as a whole, considering its purpose.
However, the mere statement that the structural elements for the wind farm as a whole are fulfilled does not answer the question of which specific realities of the wind farm should be registered and included in the evaluation. Guideline 2/2021 merely indicates, without any justification, as if the issue was evident or had already been decided, that substations, control buildings, wind turbines and land must be evaluated. Even worse, concerning wind turbines, the PTA decide in an absolutely unfounded way, that only the “set of blades, rotor and cabin (nacelle)” are excluded from the evaluation, considering the towers of the wind turbines as subject to evaluation. The question on which elements of the wind farm should be considered as part of the building and be registered for IMI purposes was not analysed by the STA case-law and the law does not provide or define specific criteria for this determination beyond the generic reference, in the definition of building set forth in art. 2 CIMI, to the concept of “constructions of any nature incorporated or established, with a permanent character”. Therefore, it is important to discuss and determine which elements of the wind farm shall be considered constructions and which ones should be considered equipment (therefore, excluded from the evaluation). In relation to this point and taking into account the first evaluations already made by the PTA under the new Guideline, the PTA continue to include in the calculation of the cadastral value (“VPT”) of the wind farm the value of the towers (as it did in the first evaluations that were annulled following the court decisions). In the evaluations that are now being carried out by the PTA, the value of the towers proposed by the PTA corresponds to more than 90% of the total VPT of the wind farm, so we anticipate that, given the relevance of the value the towers represent in the calculation of potential IMI of wind farms, the operators will certainly maintain the option for litigation and contest in courts the inclusion of the value of the tower as “construction” instead of as “equipment”. It should be noted that in this 2nd round of wind farm evaluations, the reduction, set forth in art. 44-A of the EBF, of 50% of the IMI rate applicable to properties exclusively allocated to the production of energy from renewable sources, is no longer available[4].
In our opinion, differently from Guideline 2/2021, the tower of a wind turbine (i) being an essential part for its proper functioning, (ii) being sold jointly and inseparably and benefiting from the same guarantees from the manufacturer, (iii) being jointly projected with the nacelle and rotor based on certain wind conditions (differently from the construction project that includes the foundations) and (iv) being certified, from a technical point of view, as and with the remaining equipment (nacelle and rotor) that the PTA accept as excluded equipment, regardless of the material it is made of, cannot be included in the evaluation of wind farms.
In addition, the new Guideline raises a set of other problems, of which we highlight the following:
– the Guideline option for qualifying as an “industrial urban building, based on the licensing of the constructions” does not seem appropriate, since the electricity production activity carried out is not considered as such in the legal framework defined for the industry sector (being excluded from the scope of the regulation of industrial activity) and there is no licensing of the constructions (foundations) for industrial purposes. Therefore, the qualification as “Others”, adopted by the PTA in the previous Guideline 8/2013, was more appropriate and balanced;
– in Guideline 2/2021, the PTA state that “if the land is part of a different patrimony or does not have a patrimonial nature [case of common land – baldios], even if it is assigned to the entity that owns the plant, it does not form part of the power plant” but despite this exclusion intends that “whenever there is economic autonomy of the buildings from the land, the land to be considered for the purposes of applying the cost method must correspond only to the area effectively occupied by the constructions, as determined in paragraph 3 of article 46”. Given that the PTA recognises that when there is no right in rem over the land, that land shall not be considered part of the power plant, we consider that in such cases the value of the land may not be included in the evaluation, moreover, because the PTA already charge IMI on that land to the respective owner or holder of rights in rem.
-we anticipate that the rule provided for in article 79 CIMI will create problems since wind farms are, generally, not fenced, and the rule provided for in paragraph 2 of that article determines that, in such case, the building shall be registered in the parish where the largest area or the greater number of constructions is located. As there is no tie-break rule for situations in which the occupied area/number of constructions in two or more parishes is exactly the same, this may lead to a conflict between municipalities, which, being hinterland areas, sparsely populated and very needy of this type of municipal revenue, will compete for the registration of the wind farms in their parishes in order to guarantee the respective revenue.
Thus, 2022 brought new chapters to the sequel concerning the registration and evaluation of wind [and solar] farms for IMI purposes and the issues that the Courts will be called to decide are new and very different from those that were discussed in the first round of cases regarding the subject.
[1] Portuguese Tax Authorities.
[2] Property Tax.
[3] Property Tax Code, set forth by Decree-Law 287/2003, of November 12th.
[4] According to art. 3 of the Tax Incentives Statute (Decree Law 215/89, of July 1st) such benefit was in force only for 5 years.
Inês Teixeira
December 2022