Stamp Tax on Building Land Over €1M: CAAD Arbitration Decision 10/2014-T

ARBITRAL DECISION

The arbitrator, Dr. Henrique Nogueira Nunes, appointed by the Deontological Council of the Center for Administrative Arbitration ("CAAD") to form the Arbitral Tribunal, constituted on 5 March 2014, hereby decides as follows:

1. REPORT

1.1

The Estate of "A", with the tax identification number ..., represented by its Head of Estate, "B", hereinafter referred to as "Claimant", requested the constitution of the Arbitral Tribunal under Article 2(1)(a) of Decree-Law No. 10/2011, of 20 January (hereinafter "RJAT").

1.2

The request for arbitral pronouncement has as its object the declaration of illegality of the stamp duty assessment act better identified under the collection document issued with number 2013 ..., carried out under the terms of item 28.1 of the TGIS [General Tax on Stamp Duty], dated 14 July 2013, referring to the year 2012, in the total amount of € 10,112.00. Additionally, the Claimant petitions for the reimbursement of the allegedly unduly paid tax and the payment of compensatory interest.

1.3

To support its request, the Claimant alleges, in summary, the following defects:

a) Error in the prerequisites, by virtue of:

(i) The urban property that constitutes a construction site, as in the case at hand, does not in fact have constructive capacity for buildings intended for housing or with residential purpose;

(ii) The intention of the legislator, in adding item 28 to the TGIS, was to direct such taxation to the taxation of "luxury housing";

(iii) The legislator intended only to tax urban properties intended for housing and not a construction site, since this is not susceptible to residential purpose;

(iv) The provision of the taxing rule in item 28 of the TGIS is not fulfilled;

(v) Nor can the coefficient of allocation provided for in Article 41 of the Property Tax Code be considered for these purposes, as the Tax Authority intends;

(vi) The Tax Authority incurred erroneous qualification of the taxable fact;

(vii) Petitions for the unconstitutionality of the interpretation followed by the Tax Authority for violation of legality and typicality of the rules of taxable scope;

(viii) Concludes by requesting the annulment of the assessment at issue in these proceedings, and the return of the amount of tax paid, plus compensatory interest from the date of payment.

1.4

The Tax and Customs Authority responded to the effect that the concept of "properties with residential purpose", for the purposes of item 28 of the TGIS, comprises an expression "different and broader" encompassing both built properties and construction sites still without erected buildings, but designed for such purpose, concluding for the maintenance of the assessment act and dismissal of the request also regarding the request for compensatory interest due to the absence of error attributable to the services.

1.5

On 4 July 2014, the first meeting of the Arbitral Tribunal took place, at the headquarters of CAAD, in accordance with Article 18 of the RJAT. No exceptions or preliminary questions were identified, the presentation of arguments was waived, and a deadline was set for the rendering of the arbitral decision.

1.6

The Tribunal was regularly constituted and is competent ratione materiae, in accordance with Article 2 of the RJAT.

The parties have legal personality and capacity, are legitimate and are regularly represented (cf. Articles 4 and 10(2) of the RJAT and Article 1 of Ordinance No. 112-A/2011, of 22 March).

No procedural defects were identified.

2. QUESTION TO BE DECIDED

The strictly legal question discussed in these proceedings is whether a construction site can be qualified as a "property with residential purpose" and, if so, be framed within the scope of taxable income of item 28.1 of the TGIS, added by Article 4 of Law No. 55-A/2012, of 29 October.

3. FACTS

The following facts are established as proven, with relevance for the assessment and decision on the merits:

A) The Claimant is the owner of a construction site currently registered in the urban property register under number ... of the Union of Parishes of ..., ..., ... and ... (cf. Urban Property Card attached as Document No. 1 to the request for arbitral pronouncement) and previously registered in the urban property register under number ..., of the extinct parish of ..., Municipality of ... (cf. assessment act with number ... attached as Document No. 2 to the request for arbitral pronouncement).

B) The identified urban property, classified as a construction site, has no building or construction erected on its land as of the date of the facts (2012), and its respective taxable patrimonial value as of the date of the facts exceeds € 1,000,000.00, amounting more specifically to:

– cf. the corresponding assessment act and the urban property card attached to the request for arbitral pronouncement as Documents Nos. 2 and 1, respectively.

C) The Tax and Customs Authority, considering the Taxable Patrimonial Value attributed to the construction site above identified, understood that the objective prerequisites for the assessment of Stamp Duty were met, arising from the addition to the TGIS of item 28 provided for in Law No. 55-A/2012, of 29 October.

D) Within this scope, the Claimant was notified of the collection document for payment of Stamp Duty listed below, relating to a single installment of tax for the year 2012, with mention of the assessment date – "2013-07-14" – in accordance with the following table:

– cf. Assessment and collection document attached as Document No. 2 to the request for arbitral pronouncement.

E) The Claimant proceeded to pay the assessed tax – cf. Document No. 2 attached to the request for arbitral pronouncement.

F) On 20 February 2013, the Claimant submitted a statement to the Tax Authority, as a response to the request for documents made by it for the purpose of assessment of the property at issue in these proceedings, wherein it informed that the said property, although considered urban, had no constructive viability, nor a subdivision permit, as it was dependent on the approval of an urbanization plan that did not exist at that date (cf. Pages 3 and 4 of the Administrative Process submitted by the Respondent).

G) On 2 January 2014, the Claimant filed a request for constitution of the Arbitral Tribunal with CAAD – cf. electronic application in the CAAD system.

4. UNPROVEN FACTS

There are no facts with relevance for the decision on the merits that have not been proven.

5. REASONING FOR THE DECISION ON THE FACTS

As to the essential facts, the agreed matter is shaped in identical fashion by both parties and the Tribunal's conviction was formed on the basis of the official documentary evidence attached to the proceedings and discriminated above, whose authenticity and truthfulness were not questioned by either party.

6. ON THE LAW

6.1 On the error in the prerequisites: scope of objective taxable income of item 28.1 of the TGIS

The assessment that constitutes the immediate object of this arbitral action originates from item 28.1 of the TGIS, added by Article 4 of Law No. 55-A/2012, of 29 October, having as an essential prerequisite the existence of properties that can be framed within the concept of "properties with residential purpose".

Since in the situation under scrutiny the property in question is exclusively a construction site, deprived of any building, it is necessary to determine the meaning of the expression "properties with residential purpose" in order to conclude whether or not it encompasses construction sites.

The matter under analysis has already been the subject of extensive arbitral tax jurisprudence. We refer specifically, without claims to exhaustiveness, to the decisions rendered in the following cases: 42/2013-T, of 18-10-2013; 48/2013-T, of 09-10-2013; 49/2013-T, of 18-09-2013; 53/2013-T, of 02-10-2013; 75/2013-T, of 01-11-2013; 144/2013-T, of 12-12-2013 and 158/2013-T, of 10-02-2014.

The Judicial Courts have also pronounced themselves on this same question. We refer to recent decisions rendered by the Supreme Administrative Court ("STA") in the following cases: 048/14, of 09-04-2014 and 0270/14, of 23-04-2014.

Both the arbitral jurisprudence cited and the judicial jurisprudence cited, which we follow, consider that construction sites fall outside the scope of the provision of item 28.1 of the TGIS, in the wording in force at the date of the facts, in the terms subsequently explained, beginning by analyzing the legislative context in which the addition of item 28 to the TGIS occurred.

A. Context of the approval of item 28.1 of the TGIS and its respective regime

In the discussion in Parliament of Bill No. 96/XII (2nd), which was the origin of Law No. 55-A/2012, which added item 28 to the TGIS, the State Secretary for Tax Affairs stated that:

"(...) In order for the tax system to promote greater equality, it is fundamental that the effort for budgetary consolidation be shared by all taxpayers and affect all types of income, with special emphasis on capital income and high-value properties. This matter, it will be recalled, was extensively addressed in the Constitutional Court decision (...).

This proposal has three essential pillars: the creation of special taxation on urban properties with value exceeding 1 million euros; the increase in taxation on capital income on capital gains; and the strengthening of rules to combat tax fraud and evasion.

In the first place, the Government proposes the creation of a special tax to tax residential urban properties of higher value. It is the first time that Portugal creates a special taxation on high-value properties intended for housing. This rate will be 0.5% to 0.8% in 2012 and 1% in 2013, and will apply to houses with value equal to or exceeding 1 million euros. With the creation of this additional tax, the tax effort required of these owners will be significantly increased in 2012 and 2013" (emphasis added) – cf. Parliamentary Record, I series, No. 9/XXII-2, of 11 October 2012, pp. 31-32.

Neither the houses nor the residential urban properties referred to here correspond to construction sites. It should be noted that residential urban properties are one of the classification concepts contained in Article 6 of the Property Tax Code, clearly distinct from construction sites. Indeed, the cited No. 1 of Article 6 provides:

"1 - Urban properties are divided into:

(vii) Residential;

(viii) Commercial, industrial or service;

(ix) Construction sites;

(x) Other." (emphasis added)

Thus, residential urban properties and construction sites are, for purposes of the Property Tax Code (whose applicability, by cross-reference, to Stamp Duty is, as will be seen below, to be invoked), two distinct categories, with their own legal classifications and definitions contained in the mentioned Article 6 of the Property Tax Code[1].

In light of the foregoing, and as emphasized in the arbitral decision in case No. 75/2013-T, of 1 November 2013, it appears clear that "in the spirit of the Bill that originated Law No. 55-A/2012, the taxation of construction sites was not intended, there being, on the other hand, no evidence to the contrary from the Deputies who approved the law".

Having established the context, it should be noted that the regime in question came to be approved by Law No. 55-A/2012, of 29 October, and, among various amendments it made to the Stamp Duty Code, added item 28 to the TGIS, with the following wording:

"28 – Ownership, usufruct or surface right of urban properties whose taxable patrimonial value contained in the register, under the terms of the Property Tax Code, is equal to or exceeding € 1,000,000 – on the taxable patrimonial value used for purposes of the Property Tax:

28.1 – For property with residential purpose – 1%;

28.2 – For property, when the taxable persons who are not natural persons are resident in a country, territory or region subject to a clearly more favorable tax regime, contained in the list approved by ordinance of the Minister of Finance – 7.5%". (emphasis added)

B. The concept of "property with residential purpose"

It is necessary, therefore, to interpret the provision in item 28.1 of the TGIS and determine its meaning and scope, given the absence of a legal definition of the concept of property with residential purpose (a fundamental notion for delimiting the objective scope of application), whether in the Stamp Duty Code itself or in any other statute, including the Property Tax Code applicable by cross-reference.

Indeed, as emphasized in the Arbitral Award relating to case No. 53/2013-T, of 2 October 2013, the concept of "property with residential purpose" is not employed by other tax legislation, in particular, as is relevant to the case, in the Stamp Duty Code and in the Property Tax Code, the latter being applicable subsidiary to item 28 of the TGIS, as provided for in Articles 2(4); 3(3)(u); 5(u); 23(7); 46(5) and 67(2), all of the Stamp Duty Code.

In the same sense, the Arbitral decision in case No. 144/2013-T, of 12 December 2013 refers that this concept used by item 28.1 (of property with residential purpose) "not only is not defined in any provision of the Stamp Duty Code, but is also not used in the Property Tax Code, the statute to which Article 67(2) of the Stamp Duty Code expressly refers when matters not regulated in the Stamp Duty Code concerning item 28 are at issue."

Tax provisions must be interpreted as any others, the conception that they would have an exceptional character that was once attributed to them being now overcome.

In this regard, it should be noted that Article 9 of the Civil Code marks the prevalence of the spirit over the letter of the law, although it has expressly placed the letter as a limit to the search for meaning[2]. Article 9 of the Civil Code is the emanation of a general hermeneutic principle, having, for that reason, intrinsic validity. This provision states:

"1. Interpretation must not be limited to the letter of the law, but must reconstruct from the texts the legislative thought, having especially in mind the unity of the legal system, the circumstances in which the law was enacted and the specific conditions of the time in which it is applied.

1. However, the interpreter cannot consider the legislative thought that does not have in the letter of the law a minimum of verbal correspondence, even if imperfectly expressed.

2. In determining the meaning and scope of the law, the interpreter shall presume that the legislator adopted the most correct solutions and knew how to express its thought in adequate terms."

The General Tax Law, in its Article 11, came to establish, in the specific field of tax laws, a set of interpretation rules as follows:

1. In determining the meaning of tax provisions and in qualifying the facts to which they apply, the general rules and principles of interpretation and application of laws are observed.

2. Whenever, in tax provisions, terms specific to other branches of law are used, they must be interpreted in the same sense as they have there, unless otherwise directly emerges from the law.

3. Persisting doubt over the meaning of the taxable income rules to be applied, regard should be had to the economic substance of the taxable facts.

4. Gaps resulting from tax provisions covered by the parliamentary reserve cannot be filled by analogical extension.

It appears that the text of the General Tax Law adds nothing, remitting to general rules and principles, in addition to incorporating principles that are difficult to reconcile.

As seen above, the Property Tax Code uses (in Article 6(1)) the notion of residential urban properties, which it establishes as an autonomous and distinct category from that of construction sites, but does not provide for the concept of "property with residential purpose", whose interpretation is now required.

At this point, we resort again to arbitral jurisprudence and the Award rendered in case No. 53/2013-T, referenced above, which we here approve and from which the following excerpt is transcribed:

"3.2.5. Concept of 'property with residential purpose' as relating to residential properties

The concept closest to the literal tenor of this expression used is manifestly that of 'residential properties', defined in No. 2 of Article 6 of the Property Tax Code as encompassing 'buildings or constructions' licensed for residential purposes or, in the absence of license, that have residential purposes as their normal destination.

To understand that the expression 'property with residential purpose' coincides with that of 'residential properties', it is manifest that the assessments will be marred by error in the factual and legal prerequisites, since all properties to which Stamp Duty was assessed under the aforementioned item 28.1 are construction sites, without any building or construction, required to satisfy that concept of 'residential properties'.

Therefore, if the interpretation is adopted that 'property with residential purpose' means 'residential property', the assessments whose illegality declaration is sought will be illegal, as there is in any of the sites any building or construction.

However, the non-coincidence of the terms of the expression used in item 28.1 of the TGIS with that which emerges from No. 2 of Article 6 of the Property Tax Code points to the conclusion that the same concept was not intended to be used.

3.2.6. Concept of 'property with residential purpose' as a concept distinct from 'residential properties'

The word 'purpose', in this context of use of a property, has the meaning of 'the action of designating something for a particular use'.

'When, as is usually the case, the norms (legislative formulas) bear more than one meaning, then the positive function of the text manifests itself in giving stronger support to or more strongly suggesting one of the possible meanings. For among the possible meanings, some will correspond to the more natural and direct meaning of the expressions used, while others will fit within the verbal framework of the norm only in a forced, affected manner. Now, in the absence of other elements that would lead to the election of the less immediate meaning of the text, the interpreter should opt in principle for that meaning which best and most immediately corresponds to the natural meaning of the verbal expressions used, and namely to its technical-legal meaning, in the assumption (not always exact) that the legislator knew how to express its thought correctly'.

The relevance of the text of the law is especially emphasized in the matter of interpretation of Stamp Duty taxable income provisions, which constitute a hodgepodge, under a common denomination, of an incongruous set of taxes of completely different natures (on income, on expenditure, on property, on acts, etc.), which leaves little room for application of the primary interpretative criterion, which is the unity of the legal system, which demands its overall coherence.

The recognized lack of coherence of Stamp Duty is particularly exuberant in the case of this item 28.1, hastily included at the margin of the General State Budget, by a tax legislator without perceptible global tax guidance, who is successively implementing tax increase rules as budgetary execution setbacks occur, the impositions of international institutional creditors (represented by the 'troika') and the oversight of the Constitutional Court. (…)

In this context, there being no sure interpretative elements that allow for detecting legislative coherence in the solution adopted in the aforementioned item 28.1 or the correctness or incorrectness of the solution adopted (relevant for interpretative purposes in light of No. 3 of Article 9 of the Civil Code), the content of the legal text must be the primary element of interpretation, in accordance with the presumption, imposed by that same No. 3 of Article 9, that the legislator knew how to express its thought in adequate terms.

In light of those meanings of the words 'purpose' and 'to purpose', which are 'to give a destination to' or 'to apply', the formula used in that item 28.1 of the TGIS manifestly encompasses properties that are already applied to residential purposes, so it is necessary to inquire whether it will also encompass properties that, although not yet applied to residential purposes, are destined for such purpose, and those whose destination is unknown.

In light of the literal content of item 28.1, construction sites of some Claimants that do not yet have any defined type of use are to be excluded from the scope of Stamp Duty provided for therein, as they are not yet applied nor destined for residential purposes. That is, construction sites that do not have defined use cannot be considered properties with residential purpose, as they do not yet have any purpose nor other destination than construction of unknown type. An interpretation to the effect that item 28.1 refers to properties whose purpose is unknown has not the minimum of verbal correspondence in the letter of that norm, so a hypothetical legislative thought of that type cannot be considered by the law interpreter, in light of the prohibition contained in No. 2 of Article 9 of the Civil Code.

But this is not enough to clarify the situation of those construction sites that, although not yet applied to residential purposes, already have a determined destination, namely in the subdivision license (…).

Therefore, it is necessary to clarify when it can be understood that a property is purposed for residential purposes, namely whether it is when that destination is fixed for it in a licensing act or similar, or only when the actual assignment of that destination is realized.

From the outset, the comparison of item 28.1 of the TGIS with No. 2 of Article 6 of the Property Tax Code, which defines the concept of residential properties, manifestly points to the conclusion that an actual purpose is necessary.

In fact, a building or construction licensed for housing or, even without license, but that has housing as its normal destination, is, in light of No. 2 of that Article 6, a residential property.

Therefore, assuming that the legislator of Law No. 55-A/2012 knew how to express its thought in adequate terms (as Article 9(3) of the Civil Code presumes must be assumed), if it intended to refer to those properties already licensed for housing or that have housing as their normal destination, it would certainly have used the concept of 'residential properties', which would express perfectly and clearly its thought, in light of the definition given by that No. 2 of Article 6 of the Property Tax Code.

Consequently, it should be presumed that the use of a different expression is intended to refer to a different reality, so, in good hermeneutics, 'property with residential purpose' cannot be a property merely licensed for housing or intended for such purpose (that is, it will not suffice that it be a 'residential property'), having to be a property that already has an actual purpose for such use.

That this is the meaning of the expression 'purpose', in the same context of property classification that the Property Tax Code makes, is confirmed by Article 3 in which, with respect to rural properties, reference is made to those that 'are purposed or, in the absence of concrete purpose, have as their normal destination a use that generates agricultural income', which shows that purpose is concrete, actual. In fact, as can be seen from the final part of this text, a property may have as destination a particular use and be or not purposed to it, which shows that purpose is, at the level of connection of a property to a particular use, something more intense than mere destination and which may or may not occur, downstream of this and not upstream.

Moreover, the text of the law, by adopting the formula 'property with residential purpose', instead of 'urban properties with residential purpose', which appears in the aforementioned 'Statement of Reasons', points strongly to the conclusion that the property already must have that purpose realized, as only thus will the property have that purpose.

With regard to Article 45 of the Property Tax Code, it has no relation whatsoever to the classification of properties, merely indicating the factors to be considered in the valuation of construction sites. What is considered there, in making reference to the 'building to be constructed' is the consideration of the destination of the land, which, as has been seen, is something that, in the context of the Property Tax Code, does not imply purpose and occurs before it.

The correctness of this interpretation to the effect that only properties that are actually purposed for housing are included within the scope of item 28.1 of the TGIS is also confirmed by the discernible ratio legis of the restriction of the field of application of the rule to properties with residential purpose, in the context of the 'circumstances in which the law was enacted and the specific conditions of the time in which it is applied', which Article 9(1) of the Civil Code also elevates to interpretative elements.

From the outset, the limitation of Stamp Duty taxation to 'properties with residential purpose' gives the perception that it was not intended to encompass within the scope of the tax properties purposed for services, industry or commerce, that is, properties devoted to economic activity, which is understood in a context where, as is notorious, the economy finds itself in a recessionary spiral, publicly proclaimed at the highest level, with unemployment rates reaching maximum historical levels, with an avalanche of business closures resulting from economic unsustainability.

Bearing in mind this situation and it being well known and public that the revitalization of economic activity and the increase in exports are the ways out of the crisis, it is understood that legislative measures were not taken that would hinder economic activity, namely the increase in tax burden that hinders it and affects international competitiveness.

Therefore, it is to be concluded that the available interpretative elements, including the 'circumstances in which the law was enacted and the specific conditions of the time in which it is applied', clearly point to the conclusion that it was not intended to encompass within the scope of item 28.1 situations of properties that are not yet purposed for housing, namely construction sites held by companies."

Within this scope, for the reasons just explained, the understanding advocated by the Tax Authority cannot stand, that the notion of purpose (residential) of an urban property should be sought in the regime for the valuation of real property contained in Article 45 of the Property Tax Code (which takes into account the coefficient of allocation provided for in Article 41 of the same Code).

In fact, as well noted in the decision of arbitral case No. 144/2013-T, "If the primary meaning of 'purpose', as we have said, suggests an actual, direct destination given to a certain asset, we do not see how this understanding can be contradicted by the finding that the legislator, within the framework of the valuation of construction sites, authorizes (assuming it does authorize) the use of the allocation coefficient, with a view to what can be constructed thereon."

C. The case sub judice

In accordance with the facts, which are consensual, the real property underlying the Stamp Duty assessment made, here disputed, constitutes a construction site, deprived of any building.

Taking as correct and valid (as we do) the understanding that item 28.1 of the TGIS postulates the necessity of an actual residential purpose of an urban property and not merely potential, a construction site cannot be considered included in that item, as it does not permit, by its very nature, to have an actual and current residential purpose.

Thus, in the situation at hand we are not faced with a property with current residential purpose, so the Stamp Duty provided for in item 28.1 of the TGIS cannot apply to it, the disputed assessment suffering from error in the prerequisites, embodied in the violation of the aforementioned item 28.1, and should be annulled (cf. Article 135 of the Administrative Procedure Code, applicable subsidiary ex vi Articles 2(d) of the Tax Procedural Code and 29(1)(a) and (d) of the RJAT).

6.2 On the alleged violation of constitutional principles

The Claimant raised questions of unconstitutionality, in the interpretation of item 28.1 of the TGIS made by the Respondent, on the assumption that the stamp duty provided for therein could also apply to construction sites.

Considering that this Arbitral Tribunal did not accept that interpretation, this question becomes moot and procedurally immaterial.

6.3 On the reimbursement of the amount paid and the request for compensatory interest

The Claimant seeks reimbursement of the amount paid under the assessment act at issue in these proceedings, in the total amount of € 10,112.00, plus compensatory interest for the unduly paid amounts.

For its part, the Respondent argues that compensatory interest is not attributable to it, as there is no error in the factual or legal prerequisites that can be directly attributed to it.

It must be said from the outset that the Respondent is entirely without reason.

In the case at hand, it is manifest that, as a consequence of the illegality of the assessment, for the reasons better expounded in this decision, reimbursement of the tax paid by the Claimant is required, by force of the provisions of Articles 24(1)(b) of the RJAT and 100 of the General Tax Law, as this is essential to "restore the situation that would exist if the tax act that is the object of the arbitral decision had not been carried out".

With regard to compensatory interest, it is also clear in the proceedings that the illegality of the disputed tax assessment is directly attributable to the Respondent, which, on its own initiative, carried it out without legal support, suffering from an erroneous interpretation (and therefore application) of the legal provisions to the specific case.

Consequently, the Claimant has the right to receive compensatory interest, under the terms of Articles 43(1) of the General Tax Law and 61 of the Tax Procedural Code.

Compensatory interest should be paid to the Claimant from the date on which it made the respective payment of the stamp duty installment at issue in these proceedings until the full reimbursement of the amount paid, at the legal rate.

The Claimant's request is therefore warranted.

7. DECISION

In light of the foregoing, this Single Arbitral Tribunal hereby decides:

• To judge the arbitral pronouncement request as well-founded and to declare the annulment of the Stamp Duty assessment act, better identified under the collection document issued with number ......, dated 14 July 2013, in the amount of € 10,112.00, with its legal consequences.

• To judge as well-founded the request to condemn the Respondent to reimburse the Claimant the amount paid as tax, plus compensatory interest under the legal terms, from the date on which such payment was made until the date of full reimbursement of the same.

The value of the case is set at Euro 10,112.00, in accordance with the provisions of Articles 3(2) of the Regulation of Costs in Tax Arbitration Proceedings, 97-A(1)(a) of the Tax Procedural Code and 306 of the Code of Civil Procedure.

The amount of court costs is set at Euro 918.00, under Article 22(4) of the RJAT and Table I attached to the Regulation of Costs in Tax Arbitration Proceedings, to be borne by the Tax and Customs Authority, in accordance with the provisions of Articles 12(2) of the RJAT and 4(4) of the Regulation of Costs in Tax Arbitration Proceedings.

Let it be notified.

Lisbon, 15 July 2014.

The Arbitrator,

Dr. Henrique Nogueira Nunes

Text prepared by computer, under Article 131(5) of the Code of Civil Procedure, applicable by cross-reference in Article 29(1)(e) of the RJAT.

The drafting of this arbitral decision is governed by the orthography prior to the Orthographic Agreement of 1990.

[1] Numbers 2 to 4 of Article 6 of the Property Tax Code define the concepts in question:

"2 – Residential, commercial, industrial or service are buildings or constructions licensed for such purposes or, in the absence of license, which have as their normal destination each of these purposes.

3 – Construction sites are deemed to be plots of land situated inside or outside an urban agglomeration for which a license or authorization has been granted, prior communication admitted or favorable prior information issued for a subdivision or construction operation, and also those that have been declared as such in the title of acquisition, except those plots where the competent entities prohibit any of those operations, namely those located in green areas, protected areas or which, according to municipal land use plans, are devoted to public spaces, infrastructure or facilities. (wording of Law No. 64-A/2008, of 31 December)

4 – Properties falling within the provision of subparagraph (d) of No. 1 are plots of land situated within an urban agglomeration that are not construction sites and are not covered by the provision of No. 2 of Article 3, and also buildings and constructions licensed or, in the absence of license, that have as their normal destination purposes other than those referred to in No. 2, and also those under the exception of No. 3."

[2] See Oliveira Ascensão, "Interpretation of laws. Integration of gaps. Application of the principle of analogy", in Review of the Bar Association, Year 57 – III, Lisbon, December 1997, pp. 913-941.

[3] Moreover, not even having any constructive viability while the respective Urbanization Plan is not approved.