Stamp Tax on Usucapião (Adverse Possession): CAAD Arbitration Decision 105/2015-T Analysis

ARBITRAL DECISION

CAAD: Tax Arbitration

Case No. 105/2015-T

Subject: Stamp Tax – Adverse Possession

CLAIMANT: A

RESPONDENT: TAX AND CUSTOMS AUTHORITY

I – REPORT

A) The Parties and Constitution of the Arbitral Tribunal

1. A, taxpayer no. …, resident at Calçada …, no. …, …, …, …, Lisbon, hereinafter referred to as "Claimant," having been notified of the decision of partial dismissal of the administrative complaint, requested the constitution of a singular Arbitral Tribunal, pursuant to Article 2, no. 1, paragraph a) and Article 10, no. 1 and 2 of Decree-Law no. 10/2011, of January 20, hereinafter referred to as "RJAT" and Order no. 112-A/2011, of March 22, to challenge this partial dismissal, and to obtain a declaration of illegality of the Stamp Tax (IS) levy, attached as documents nos. 1 and 2 to the arbitral petition, which are hereby reproduced in full for all legal purposes, in the total amount payable of €5,459.85.

2. The request for constitution of the Arbitral Tribunal was submitted by the Claimant on 18-02-2015, was accepted by His Excellency the President of CAAD on 20-02-2015 and notified to the Tax and Customs Authority (ATA) on that same date.

3. The Claimant chose not to appoint an arbitrator, and therefore, pursuant to Article 6, no. 1 of the RJAT, the undersigned was appointed on 13-04-2015 by the Deontological Council of the Center for Administrative Arbitration as sole arbitrator. The appointment was accepted and the parties were notified of the arbitrator's appointment, having manifested no intention to refuse the appointment.

4. Thus, in accordance with the provisions of paragraph c), no. 1, Article 11, of Decree-Law no. 10/2011, of January 20, as amended by Article 228 of Law no. 66-B/2012, of December 31 (RJAT), the Singular Arbitral Tribunal was constituted on 28-04-2015. The ATA was notified on the same date to submit a response within the legal timeframe, in accordance with and for the purposes of Article 17, nos. 1 and 2 of the RJAT.

5. The ATA submitted its response on 01-06-2015, which is hereby reproduced in full. It also attached the respective administrative proceedings (PA). On 01-06-2015 the Claimant submitted a request for extension of the claim, attaching proof of payment of another installment of the tax. The Respondent was notified to comment and the attachment of said request and annexed document to the proceedings was accepted. The parties involved in the proceedings were consulted, and an arbitral order was issued dispensing with the holding of the meeting provided for in Article 18 of the RJAT. By arbitral order of 02-07-2015, the holding of the meeting was dispensed with and a deadline was set for the parties' submissions and issuance of the arbitral decision until 25-10-2015. The Claimant was further warned to, by that date, proceed with payment of the subsequent arbitration fee.

6. There is no disagreement between the parties regarding the facts invoked by the Claimant nor regarding the documents attached, but only regarding the interpretation of applicable law.

B) THE CLAIM FORMULATED BY THE CLAIMANT:

1. The Claimant submits the present request for arbitral pronouncement, not accepting the partial dismissal of the administrative complaint filed and, consequently, the act of levy of stamp tax on acquisition by adverse possession, issued with no. …, attached to the arbitral petition as document nos. 1 and 2, seeking the illegality, with the consequent annulment, of the Stamp Tax levies, whose value the Claimant presumes to be between €1,819.95 and €5,459.85, considering the provisions of Article 45, no. 2 of the Municipal Real Estate Tax Code (CIMI), pursuant to Article 13 of the Stamp Tax Code (CIS). Taking into account that the administrative complaint was partially granted, accepting the Claimant's allegation that the Tax Patrimonial Value for reference for the levy of IS that were to exist (because the Claimant understands it is not owed) should be based on the value of the land and not on the value of the entire built property.

2. The original levy was re-examined and altered in the administrative complaint proceeding, as results from the analysis of the PA attached to the proceedings, namely all elements contained in the Administrative Complaint procedure filed by the Claimant, with no. …2014…, which was considered partially substantiated, as stated in the Order of the Tax Service of 28-11-2015, and therefore all documents attached by the Claimant to these proceedings and those contained in the PA attached by the ATA are hereby fully reproduced.

In summary, the Claimant bases his claim, alleging the following:

1. The Claimant challenges the decision of partial dismissal of the administrative complaint and seeks the illegality of the subsisting tax levy act, that is, the part of stamp tax on acquisition by adverse possession, in the part not yet annulled. The Claimant alleges that the part of the subsisting act cannot be quantified with exactitude, since it concerns stamp tax on acquisition by adverse possession of a real estate property that had as its tax base the tax patrimonial value of the building erected thereupon, namely €121,330.00. In the administrative complaint proceeding, the subsidiary claim was granted that the tax patrimonial value be only the value of the land for construction, and consequently this latter was reduced to a value between 15% and 45% of the tax patrimonial value of the construction in accordance with the provisions of Article 45, no. 2, of the Municipal Real Estate Tax Code (CIMI), pursuant to Article 13 of the Stamp Tax Code (CIS). The Claimant concludes that thus the levy of this tax shall be fixed between €1,819.95 and €5,459.85, and that only after the execution of the partial grant of the administrative complaint will it be known with certainty.

2. The Claimant alleges that there cannot be any Stamp Tax on adverse possession when for tax purposes the acquisition of the real estate property had already been deemed to have occurred and had already been taxed. The taxation in Stamp Tax on adverse possession confronts in this case a logical impossibility, since if it was considered by tax law that there was a (onerous) acquisition for tax purposes in 1979 (triggered – and as such taxed – by a contract for deed with delivery of the property), this same tax law cannot again consider that there exists for tax purposes once more an acquisition (now gratuitous), in 2013, of the same property, by the same taxpayer, subject to a second taxation, now Stamp Tax (IS).

3. According to the Claimant, such a perspective is equivalent to defending that there were two acquisitions on the tax plane of the same property, which, beyond being illogical and contrary to the principle of a reasonable and minimally coherent legislator, offends the principle of justice and violates, moreover, the principle that results from the coordination rule between the Code of Real Estate Transfer Tax on Onerous Transactions (CIMT, which succeeded the Sisa Code) and the Stamp Tax Code (CIS) in the sphere of gratuitous transfers: the principle of non-overlapping application of these two taxes, which are only to be applied simultaneously when the transaction is mixed (a mixture of onerous and gratuitous) and even then subject to proper segregation of the gratuitous and onerous parts of the acquisition of the real estate property for purposes of tax treatment of the two taxes without overlaps (see Articles 3, 12, and 13 of CIMT, and Article 19 of CIS).

4. The Claimant further alleges that pursuant to Article 5, no. 2, of CIMT, combined with paragraph a) of no. 2 of Article 2 of CIMT, the acquisition occurred fiscally in 1979, the year in which by such fact (fiscal acquisition of the property), the acquirer paid the due Sisa tax (then provided for in the equivalent, no. 2 of § 1 of Article 2 of the Municipal Sisa Tax Code and Tax on Successions and Gifts – CIMSISD), plus compensatory interest for the delay in promoting such tax levy. Therefore, it is an unacceptable systematic contradiction to consider that such transmission which had already occurred on the tax plane, occurred again on the same tax plane (and based on that to tax again), upon the celebration of the notarial justification deed.

5. In summary, the Claimant considers the property to be present in the Claimant's patrimony since 1979, according to the evaluation of the facts and application of law made timely by tax law and by the application thereof made by the ATA, for which acquisition that occurred in 1979, of which the Claimant took knowledge in 1986 with the declaration of inscription in the property register made by the Claimant, levied Sisa and respective compensatory interest (counted from 1979 to 1986), which were paid in full. The recognition of the Claimant as owner, in light of applicable tax rules, occurs from 1979. Furthermore, the Claimant has been paying the due IMI (and previously municipal contribution). It is therefore not possible now, pretending that such acquisition did not exist and did not trigger taxation, to pretend that for tax purposes the acquisition would (contradictorily) have occurred in 2013 (by force of the notarial justification deed), from which results the illegality of this levy now of stamp tax on acquisition.

6. For all this, the partial dismissal suffers from illegality and likewise the consequent stamp tax levies, imposing their total annulment and the condemnation of the ATA to reimburse all amounts paid plus compensatory interest at the legal rate until full payment.

C – THE RESPONDENT'S ANSWER

1. The Respondent ATA, duly notified for that purpose, timely submitted its answer in which, by way of exception and by challenge, alleged, in summary, that the ATA services, in deciding as they decided by partial grant of the administrative complaint, decided in accordance with law, purging the reclaimed levy of any illegality.

2. Just as the ATA services decided in the administrative complaint proceeding: "Contrary to what the complainant seeks, the question at issue in these proceedings does not concern the notion of acquisition, but rather the objective scope of stamp tax. (…) the matter at hand concerns the fact that, in the present case, stamp tax does not fall on the transfer, but on the act of the deed. Indeed, the tax event of the transfer was already subject to taxation under SISA (current IMT), on the due date. However, the public notarial justification deed of adverse possession is a notarial instrument subject to taxation in stamp tax, under Article 1, no. 1 of CIS: 'Stamp tax falls on all acts, contracts, documents, titles, papers. Regardless of the content of the act, whether it is a transfer or other, the objective scope is that document.'"

3. In this regard, according to the Respondent, the decision of partial grant of the administrative complaint made a correct subsumption of the facts to applicable law, since, contrary to what the Claimant contends, what is at issue in these proceedings is not the concept of acquisition but rather a matter of objective scope of stamp tax. In this case, the tax event that is the object of taxation is not the acquisition, but the notarial act constituted by the notarial justification deed that evidences the acquisition by adverse possession, that is, the objective scope is the notarial document in question.

4. The ATA further adds that "indeed, the tax event of the transfer was already subject to taxation under SISA (current IMT), on the due date. However, the public notarial justification deed of adverse possession is a notarial instrument subject to taxation in stamp tax, under Article 1, no. 1 of CIS: 'Stamp tax falls on all acts, contracts, documents, titles, papers. Regardless of the content of the act, whether it is a transfer or other, the objective scope is that document.'"

5. It concludes that the Tax Service made a correct subsumption of the facts to applicable law, since, contrary to what the Claimant contends, what is at issue in these proceedings is a matter of objective scope of stamp tax. The tax event that is the object of taxation is not the acquisition, but the notarial act constituted by the notarial justification deed that evidences the acquisition by adverse possession, that is, the objective scope is the notarial document in question.

6. The Respondent admits that, as the Claimant alleges, the tax event of the transfer was already subject to taxation under SISA (current IMT), on the due date. Indeed, the Claimant is, for all tax purposes, full owner of the aforementioned property (at pages 24 and 25 of PA) so much so that, it is to the Claimant that the IMI levies are issued (at page 29 of PA). But, the acquisition being the tax event that is the object of taxation in stamp tax, the Claimant's allegations regarding the alleged duplication of taxation and the consequent violation of the principle of justice are entirely unfounded. There is thus no duplication of tax collection, since what was taxed in 1979, by force of the celebration of the contract for deed of purchase and sale, accompanied by delivery, was the acquisition proper; already in 2013, what is being taxed is the notarial act of the justification deed. Thus, the case at issue does not constitute a situation of duplication of collection, in that it does not come under Article 205 of the General Tax Procedures Code (CPPT). The situation invoked by the Claimant, had it existed, would have constituted, rather, a situation of double taxation.

7. It concludes that the allegations set forth by the Claimant cannot proceed, since no duplication of collection occurred, nor even double taxation. Even if it were not understood this way and there was taxation of the same tax event under SISA (current IMT) and IS, this would not constitute illegal taxation, contrary to what the Claimant alleges, but rather a legislative policy decision, frequent and common to other cases concerning which the acquisition of property is taxed in different taxes. Therefore, the partial dismissal of the administrative complaint does not suffer from any illegality, nor does the impugned stamp tax levy, seeking the lack of merit of the arbitral claim.

II - PROCEDURAL REQUIREMENTS

1. The Arbitral Tribunal is duly constituted. It is materially competent, pursuant to Article 2, no. 1, paragraph a) of Decree-Law no. 10/2011, of January 20.

2. The parties have judicial personality and capacity, are legitimate and are legally represented (See Article 4 and 10, no. 2 of DL no. 10/2011 and Article 1 of Order no. 112/2011, of March 22).

3. Regarding the extension of the claim, requested by the Claimant by petition submitted on 11 June 2015, accompanied by proof of payment of another installment of stamp tax, the Tribunal decided in favor of its attachment to the proceedings and heard the Respondent ATA, which stated it had no objection to the attachment, and it is certain that an extension of the claim is not justified given that the initial claim was presented with reference to the total amount of the tax levy, being at issue only the payment of the last installment. Thus, the value of the claim initially fixed in the arbitral petition of €5,459.85 should not be extended, which will correspond to the total value of the tax levy, despite its payment being fractioned in installments.

4. Thus, because it is only a matter of attachment to the proceedings of proof of payment of another installment of stamp tax under discussion in the proceedings, its attachment is admitted for purposes of determining the effects of the judgment, maintaining the value of the claim at €5,459.85, as initially fixed in the arbitral petition.

5. The proceedings are not affected by vices that would invalidate them.

6. Taking into account the tax administrative proceedings, the documentary evidence attached to the proceedings, it is now necessary to present the factual matter relevant to the understanding of the decision, which is set forth as follows.

III - STATEMENT OF FACTS

A) Proven Facts

1. As relevant factual matter, this tribunal establishes as certain the following facts:

a) The Claimant celebrated on 20-08-1979 a contract for deed of purchase and sale, in the capacity of promised purchaser of the parcel of land, identified in these proceedings, and which would later give rise to the stamp tax levy impugned;

b) From that date (20-08-1979) the Claimant took possession of the land and thereon exercised all acts inherent to his condition;

c) In 1985 the Claimant obtained a construction license for that same parcel of land;

d) In 1986 the Claimant proceeded to inscribe the then plot … in the property register, by the Tax Service of Lisbon …, took knowledge of the contract for deed celebrated in 1979, with immediate delivery of the property to the Claimant, who took possession thereof;

e) In 1986, by virtue of what is described in the above paragraphs, Sisa (and compensatory interest counted from 20-08-1979) was levied on the Claimant, having as reference the (fiscal) acquisition of the land by force of the contract for deed celebrated in 1979, accompanied by delivery of the property; (see Documents 2 and 4 attached to PA);

f) The Claimant paid the amounts of the Sisa levies and compensatory interest; (see Document 5 attached to PA);

g) On this parcel of land a building for residential purposes was erected and in 1992 the completion of works is declared;

h) Since then the corresponding amounts of Municipal Contribution and, subsequently, of IMI have been levied to the Claimant; (See Documents nos. 6, 7 and 8 attached to PA);

i) It was this building, which today appears in the property register, that served as the taxable base for the levy of stamp tax on adverse possession at issue here. (See Document 11 attached to PA);

j) After the completion of the building, the property in question then took on the current configuration and construction, and in 2011 the license for occupation was obtained; (See Document 8 attached to PA);

k) In 2013 the claimant celebrated a notarial justification deed to acquire ownership of the land by adverse possession in accordance with the notarial justification deed attached to the proceedings as document no. 3 annexed to the arbitral petition, which is hereby fully reproduced; (See Document 3 attached to PA);

l) As a consequence of this acquisition by adverse possession stamp tax is levied, whose taxable base coincided with the Tax Patrimonial Value assigned to the built property and evaluated according to the CIMI; (Document 11 attached to PA);

m) On 29 April 2013, the Claimant submitted an administrative complaint against the stamp tax levy referred to in i), alleging that he had already paid tax (Sisa) for the acquisition of this property and therefore it made no sense, omitting that fact, to act as if on the tax plane the Claimant had only now acquired it, and that if it were not understood thus, then the reference value for the tax scope would have to correspond only to the value of the land; (See Document 1 attached to PA);

n) The ATA considered the administrative complaint partially granted, recognizing that the levy of stamp tax on adverse possession could not fall on the building erected thereafter at the Claimant's expense but only on the value of the land, since only this was the object of acquisition by adverse possession (partial grant of the complaint), and therefore altered the levy of stamp tax, now with scope on the land for construction.

o) The value of the levy, with scope on the land acquired by adverse possession, corrected by the act of partial grant of the administrative complaint, which amounts to a total value of €5,459.85;

p) The Claimant paid this amount, according to a payment plan fixed in 4 installments of €1,213.30, whose proof of payment is attached to the proceedings. (See Document 11 and Document attached to proceedings on 11-06-2015).

B) UNPROVEN FACTS

1. There are no other unproven facts relevant to the decision to be rendered.

C) STATEMENT OF PROVEN FACTS

1. The facts described above were established as proven based on the documents that the parties attached to the present proceedings, the Claimant to its petition and the ATA in its answer and respective Administrative Proceedings, to which is added the fact that there is no disagreement between the parties regarding the facts stated in the arbitral petition and confirmed by documents.

IV – ISSUE TO BE DECIDED AND STATEMENT OF LAW

1. The issue to be decided consists in determining whether the acquisition of land by adverse possession, through a notarial justification deed celebrated for that purpose in 2013, under the terms described in these proceedings, is or is not subject to stamp tax, knowing that at an earlier moment (1986) the ATA had already taxed, under Sisa tax, its acquisition by the taxpayer, considering as such the celebration of the contract for deed of purchase and sale with delivery of the property, which occurred in 1979 (the land).

2. It is important, first and foremost, to determine the scope of stamp tax on the acquisition of real estate by adverse possession. It is a matter of determining whether the taxation of the acquisition is at issue or, as the Respondent ATA alleges, the taxation of the notarial act of justification and, as a consequence of the answer found, decide its application to the specific case at hand.

3. To assess the issue that presents itself to this tribunal, it is important to consider the nature of stamp tax, not only in its origin but in the legal form it came to assume over the years, notably expanding its taxable base with the entry into force of Decree-Law no. 287/2003 of November 12 and with the extinction of the former tax on successions and gifts. This is a tax with a long history in the Portuguese tax system, of simple procedure and high tax revenue, which explains its longevity and the progressive expansion of its taxable base.[1] Because this is the case, stamp tax constitutes, together with IMI and IMT, an instrument for taxation of patrimony, by choice of the legislator that, for a long time, has ceased to view stamp tax as merely a "tax on paper."

4. Throughout its history, with greater emphasis on its recent evolution, stamp tax, which was born as a tax on documents, stamped paper, credit instruments, authentication of documents, contracts, settlement terms, notarial acts and the like, has been expanding its taxable base by converting itself into a heterogeneous tax, affecting a diverse multiplicity of facts, acts and legal situations ("acts, contracts, documents, titles, papers and other facts or legal situations"…, as established in Article 1 of the Code), apparently without a common trait that would give them identity."[2] This tax ended up assuming the nature of "subsidiary tax of taxes on income and consumption seeking to reach manifestations of taxpaying capacity not covered by the scope of any other taxes. Not having the nature of overlapping taxation, this tax tends to assume a residual function filling spaces left open by the taxation of income and consumption."[3]

5. With the reform of the taxation of patrimony, the legislator chose to introduce into the CIS the taxation of non-exempt gratuitous transfers (successions and gifts), ceasing to exist an autonomous tax code. Thus, was introduced into the General Table of Stamp Tax item 1.2, which establishes the subjection to tax of "gratuitous acquisition of property, including by adverse possession, in addition, where applicable, to item 1.1 at the rate of 10%."

Article 1 of CIS provides:

"Stamp tax falls on all acts, contracts, documents, titles, papers and other facts or legal situations provided for in the General Table, including gratuitous transfer of property."

And adds, in paragraph a) of its no. 3:

"For purposes of item 1.2 of the General Table, are considered gratuitous transfers, designedly, those that have as object:

a) Right of Property or segmented forms of that right over real estate property, including adverse possession."

1. Acquisition by adverse possession is thus within the scope of Stamp Tax, not the notarial act that supports it, but the original acquisition of real estate by adverse possession. It is the acquisitive act in itself that is taxed, because the legislator understands that we are dealing with a gratuitous acquisition and as such is subject to stamp tax. Recall that this is a solution that arose in the Portuguese tax system, as already mentioned, in the context of the 2004 reform of the taxation of patrimony.

2. Article 1,287 of the Civil Code provides that adverse possession corresponds to possession of the right of property or other rights of use, maintained for a certain lapse of time, enabling the possessor, unless otherwise provided, to acquire the right to the exercise of which his conduct corresponds. When adverse possession is invoked, its effects retroact to the date of the beginning of possession, with possession being constituted, among other facts, by the repeated practice, with publicity, of material acts corresponding to the exercise of the right. (see Articles 1,288, 1,317, paragraph c) and 1,263 of the Civil Code).

3. In the tax sphere, the acquisition of real estate by adverse possession is subject to stamp tax, which falls on all acts, contracts, documents, titles, books, papers, and other facts provided for in the General Table, including gratuitous transfers of property, with acquisition by adverse possession, provided for in Articles 1,287 et seq. of the Civil Code, being considered a gratuitous transfer of real estate property.

4. In the case of these proceedings, as results from the proven facts, the celebration of the contract for deed with delivery of the property that occurred in 1979 was considered by the ATA, in accordance with the provisions of the Sisa Code then in force, as an act equivalent to acquisition by public deed of purchase and sale. It should be said that, then as now, the legislator provided for a set of legal situations equivalent to acquisition by celebration of public deed of purchase and sale, applying the tax to the patrimonial acquisition at the moment when the equivalent fact or act occurred. In the case at hand, that fact occurred with the celebration of the contract for deed with delivery of the property, in 1979, and therefore, for tax purposes everything occurred as if the acquisition of the land had occurred at that moment. Accordingly, it taxed that acquisition, according to the terms and in light of the provisions then in force, under the Sisa Code and which corresponds to what is provided in the current Article 2, no. 2, paragraph a) of CIMT.

5. In fact, this same result follows from the statement of reasons of the decision of partial grant of the administrative complaint presented by the Claimant, from which it is clear that:

a. In 1986, the Tax Service, upon learning of the contract for deed of purchase and sale with delivery of the property, promoted the levy of Sisa, reporting its effects to the date of the celebration of the contract (1979), collecting the respective compensatory interest;

b. As results from the very statement of reasons of the decision rendered by the Tax Service, Sisa was due, to the extent that the law "deems" the acquisition of property reporting it to the moment of the celebration of the contract for deed with delivery of the property; a situation that remains in the current CIMT (Article 2, no. 2, paragraph a), first part);

c. In 2013, with the celebration of the notarial justification deed for acquisition of the same property by adverse possession, the Tax Service levies stamp tax, considering as the taxable base the Tax Patrimonial Value assigned to the built property;

d. After the administrative complaint presented by the Claimant the ATA corrects the levy act, recognizing that the reference value for the levy of stamp tax due by acquisition by adverse possession should fall only on the value referring to the land, since only this was acquired by adverse possession.

1. Having said this, there is no doubt that the real estate property whose acquisition by adverse possession is now being taxed (land) is exactly the same that had already been taxed (in 1986, with effects reported to 1979, with corresponding compensatory interest) by force of the contract for deed with delivery of the property, under the provisions of the Sisa Code then in force.

Articles 1 and 2 of the Sisa Code and Tax on Successions and Gifts provided:

Article 1

"Are subject to sisa and to tax on successions and gifts, according to the following articles, perpetual or temporary transfers of property, whatever the title by which they operate.

Article 2

Sisa falls on transfers, on an onerous basis, of the right of property or segmented forms of that right, over real estate property.

(…)

§ 1 Are considered, for this purpose, transfers of real estate property:

(…)

1. Promises of purchase and sale or exchange of real estate property, as soon as delivery is verified for the promised purchaser or for the promised parties to the exchange or when the latter or these are enjoying the property."

2. It is thus evident that the tax law then in force, just as the current law (CIMT), considered, for tax purposes, as a transfer subject to tax (equivalent to the celebration of a contract of purchase and sale) a broad set of situations (with no coincidence whatsoever with civil law concepts) among which the celebration of a contract for deed with delivery of the property. Because this is the case, it taxed that acquisition with reference to the land in question, reporting its effects to the year 1979, in which the contract was celebrated and possession of the property was given to the promised purchaser.

3. The situation described above is in all respects equivalent to what is currently found in Article 2, paragraph of CIMT. Adverse possession constitutes an acquisition, and it is this very thing that the legislator intends to tax under stamp tax and not the notarial act (notarial justification deed), as the ATA alleges in its answer. Adding to everything set forth above, it should be said that the provision of scope contained in item 1.2 of the General Table of Stamp Tax is clear and expressly refers: "Gratuitous acquisition of property, including by adverse possession (…)."

4. There is thus no doubt that it is on the acquisition and its respective value that the tax falls, and therefore the ATA's argument according to which the stamp tax in question would fall on the document "public deed" and not on the acquisition does not hold.

5. Thus, the same acquisition of the same property cannot be taxed twice, to the same taxpayer acquirer. Now, in the case of these proceedings that is exactly what happened. By application of the rules in force at the time when the Claimant took possession of the land, the celebration of the contract for deed with delivery of the property was considered as acquisition and, as a consequence, was taxed (as an onerous acquisition), and the corresponding Sisa tax and compensatory interest were levied. The property cannot therefore be subject to new taxation, considering that the same taxpayer who acquired it in 1979 (by force of the legal fiction established), acquires it also in 2013 by adverse possession. Such would be equivalent to taxing the acquisition of the same property twice and, incomprehensibly, considering that two acquisitions occurred on the same property, in favor of the same taxpayer, one onerous (1979) and another gratuitous (2013).

6. Certainly in 2013 the already owner in light of tax rules was not yet the owner in light of civil law rules. And, as is customary, found himself in the necessity of resorting to the notarial act of justification for recognition of adverse possession, only by the necessity of regularization of ownership of the property in light of civil and registration law. However, no tax event (acquisition) susceptible to taxation occurred, since that had occurred, for all tax purposes, in 1979. Said another way, the acquisition by adverse possession that occurred in 2013 cannot be taxed, because the same concerns the same property, the same taxpayer and fact (acquisition) that occurred in 1979 and was already taxed in Sisa, justifying the celebration of the justification deed only by imperative of the rules in force in civil and registration law.

7. The tax legislator, to prevent situations of tax evasion and also to avoid constraints resulting from registration formalities or other matters that might jeopardize tax collection, diverges from the conceptual rigor of civil law and creates a set of presumptions by way of which it considers as acquisition certain facts or contracts which under civil law do not produce that effect. This is what occurs, for example, with the contract for deed of purchase and sale with delivery of the property or with the lease contract with option to purchase. It is granted that the legislator may do so for reasons of tax efficiency, and it is certain that it only alters the moment in which the tax due by the acquisition is collected, but nothing in the law permits the taxation twice of the acquisition of the same property by the same taxpayer.

8. If the tax was levied at the moment of the celebration of the contract which, according to law, is equivalent to acquisition, the tax obligation is fulfilled and cannot be collected the same tax at the moment of the formalization of the acquisition of ownership by adverse possession. In the case at hand, the same property was taxed by the onerous acquisition considered as such by force of the celebration of the contract for deed with delivery, and therefore it appears illogical and incongruous to consider that at the moment of the celebration of the notarial justification deed a new transfer occurred. The facts proved in these proceedings clearly demonstrate that the justification deed for acquisition by adverse possession was made only by legal imperative resulting from the rules of civil and registration law.

9. Having said this, it is established that the administrative complaint was the object of a decision of partial grant, rendered by Order of 28/11/2014, with the following grounds: "stamp tax should fall only on the Tax Patrimonial Value of the land acquired by adverse possession, contained in the property register at the date of the transfer (no. 1 of Article 13 of CIS). Now, stamp tax falling on the Tax Patrimonial Value of the property acquired by adverse possession excludes improvements. In other words, only the property that is the object of adverse possession is subject to stamp tax, that is, the land. In fact, the notarial document states that '(...) the party hereto justified (…) promised to purchase (…) a parcel of those parcels of land where, later, came to build the urban property above identified, with a covered area of one hundred and eight square meters and an uncovered area of two hundred and seven square meters, today located on the Street …, plot …, parish of ..., municipality of ... (…)' (at page 8)." In conformity remains in the legal order, the levy of IS by the acquisition of the land for construction, with the covered area of 108m2 and uncovered area of 207m2, located in the parish of ..., municipality of ...'"

10. In truth, underlying the very decision of the administrative complaint is the consideration of the occurrence of an acquisition by adverse possession. Now, from all that has been said above it is established in the case a double taxation of the acquisition of the same property by the same taxpayer, and it is certain that one does not acquire twice the same thing. In fact, it is established that taxation of the same tax event occurred under Sisa in 1979 (current IMT), now seeking to tax it under IS. This constitutes illegal taxation, contrary to what the Respondent alleges.

11. In this regard, the ATA alleges that regard must be had to the provisions of Article 205 of the General Tax Procedures Code (CPPT). The referred provision provides: "There will be duplication of collection (…) when, having paid in full a tax, another of equal nature is demanded of the same or different person, referring to the same tax event and to the same period of time."

12. Duplication of collection occurs when, having paid in full a tax, another of equal nature is demanded of the same or different person, referring to the same tax event and to the same period of time, which means that this figure only takes place when the following requirements are cumulatively met: the tax event is the same; the nature of the tax already paid and what is newly demanded is identical, both taxes referred to the same temporal period. In the ATA's view, this latter requirement is not met, that is, the taxation does not refer to the same taxation period, and therefore we would be dealing with the figure of double taxation, because in this, unlike in the former, various provisions of scope apply to the same tax event.

13. Now, the ATA's argument does not have merit, because what occurred was, only, that by force of the reform of the taxation of patrimony that occurred in 2004 the acquisitive fact came to be taxed in stamp tax when formerly it was taxed in the municipal Sisa tax, successions and gifts. It does not result from the law, in the old version or in the current version, the intention of the legislator to subject the acquisition of the same property by the same taxpayer to double taxation.

14. In summary, what has been occurring is, moreover, an interpretation of the law by the ATA that leads to illegal situations of duplication of collection. Thus, until recently its understanding was that expressed in the original levy reclaimed, that is, the subjection to tax of the acquisition by adverse possession would fall on the total value of the property, considering all buildings subsequently made and disregarding that only the land was acquired by adverse possession. By force of the uniform case law of the STA and the Central Administrative Courts, such understanding has been repeatedly considered illegal.

15. For brevity in the exposition, reference is made to the recent Decision of 23-09-2015, of the 2nd section of the STA, rendered in case no. 0667/15[4], which concentrates the uniform case law of the STA on this issue. It is clear and settled that only the act of acquisition of the original property (and not the act of acquisition of improvements made therein) can be inscribed within the objective scope of stamp tax. Consequently, only the act of acquisition of the parcel of land should be taxed and not the act of acquisition of improvements made to the same property by the adverse possessors. This case law is clear regarding the scope of IS, which concerns the acquisition and not the notarial act, as the respondent seeks.

16. Therefore, the reclaimed levy was necessarily condemned to annulment in the context of judicial review, which determined its alteration, reflected in the decision of partial grant rendered. However, even so, the partial grant also rests on an error of assessment of the situation of fact and of applicable law, in considering as taxable fact under stamp tax the acquisition by adverse possession of the land. Furthermore, there is the indefiniteness of the value to be assigned to the land and of the value of the stamp tax levy, after the partial grant of the administrative complaint, which by itself would determine the annulment of the entire levy. – See in this sense Decision of STA of 23-09-2015, rendered in case no. 0667/15, at www.dgsi.pt

17. It is furthermore important to note that Article 11, no. 3 of the General Tax Law establishes that "if doubt persists regarding the meaning of the provisions of scope to be applied, the economic substance of the tax events should be considered."

Now, according to the facts proved, it results that in the case at hand the ATA taxed the urban property made up of a building constructed by the claimants on land that was in their possession as a consequence of the notarial justification made in 2013 for acquisition by adverse possession, considering it to have been transferred on that date, when that is not what occurred, at least for tax purposes. In truth, by force of the application of the rules in force, in tax terms, the acquisition was onerous and had already occurred in 1979, having been taxed under Sisa tax, the tax in force at the date of the tax event.

Thus, the notarial justification for acquisition by adverse possession was and should be disregarded as a tax event, since the same was made only for satisfaction of the requirements that civil and registration law impose. For tax purposes the Claimant was already considered as full owner of the property, having fulfilled all his tax obligations, referred to the year 1979, the year in which he celebrated the contract for deed and took possession of the property. And since then has been complying with payment of the levies of municipal contribution and subsequently of IMI issued in his name in the capacity of owner of the property.

1. It should be added, citing the Decision of the STA, rendered in the appeal no. 53/10 of 12.05.2010, which dealt with a case identical to the present proceedings, that "even if there were doubts about the interpretative meaning of the provisions of scope – and we think there are not – it would always be necessary to consider the economic substance of the facts (…) – see Article 11, no. 3 of the General Tax Law.

2. Finally, it should be noted that the fact that the provision of Article 5, paragraph r) of CIS states that the tax obligation is considered constituted, in acquisitions by adverse possession, on the date on which the action for justification becomes final or the notarial justification deed is celebrated and that the provision of Article 13, no. 1 of CIS refers that the value of real estate to be considered in gratuitous transfers is the tax patrimonial value contained in the property register according to the CIMI at the date of the transfer, does not permit double taxation of the acquisition of the same property. And that is what occurs in the case at hand, in which for tax purposes an onerous acquisition occurred in 1979, at the moment of the celebration of the contract for deed with delivery of the property, which was duly taxed, with there later occurring, by formal needs of regularization of the legal situation of the property and registration of ownership, a notarial justification deed for acquisition by adverse possession.

3. The provisions stated above rest on the assumption that an acquisition occurs by force of adverse possession, not previously recognized as a fact already subject to taxation by force of applicable tax rules. In truth, according to tax law and by force of the legislator's choice in this matter, the acquisition of the property in question occurred in 1979 with the celebration of the contract for deed of purchase and sale with delivery, and therefore having taxed this acquisition at that moment it cannot later be taxed as if again the Claimant were acquiring a property that, for tax purposes, was already recognized as his property. – See also in this regard the case law expressed in the Decision of the TCAN, of 18-09-2014, in case no. 635/07.0BEBRG.

4. The tax system is moreover governed by the principles of legality, proportionality and uniformity of the legal system. Thus, the taxation of the acquisition of the land in 2013 by adverse possession, when the acquisition by the same taxpayer by onerous acquisition that occurred in 1979 had already been taxed, constitutes violation of law by error regarding the assumptions of fact and law. In the legal provision of Article 1 of CIS what is intended to be taxed are gratuitous acquisitions of property that come at that moment to the ownership of the acquirers. If these have necessity, by imperative of the rules of civil and registration law (to which tax law does not attend) to proceed to a notarial justification deed for acquisition by adverse possession of a property that according to tax law was acquired (considered as such) in 1979, having been at that time duly taxed for its acquisition, then it is concluded that there is no new tax event (gratuitous acquisition), as the Respondent claims. This is an impossibility that results from the fact that no one can acquire twice the same property, at least for tax purposes, and be taxed twice for the acquisition of the same property. It may be further said that such a situation was never in the mind of the legislator, who only intended to tax the original acquisition by adverse possession in cases in which, for civil and tax purposes, the property comes to the ownership of the taxpayer by that means, which is not the case.

5. Given that the problem under analysis results from the divergence between the concepts applicable under tax law and the corresponding concepts of civil law, the interpretation defended by the ATA constitutes a situation of abuse of right (venire contra factum proprium) and violates the principles of justice, proportionality and uniformity of the legal system. If by force of the tax law in force the acquisition occurred already previously, and there it was taxed, it cannot be again the subject of taxation.

6. Furthermore, resorting to the case law of our superior courts, we find in the Decision rendered on 18-09-2014, in case no. 635/07.0BEBRG, by the TCAN, a situation identical, which would result in double taxation, in which this Court expressly considered the following:

"1- Having the appellants celebrated in 1972, by public deed, a contract of purchase and sale of a property, being this one of the modes of acquisition of ownership (Article 1,316 of the Civil Code) and having been respected the form prescribed in Article 875 of the Civil Code, it must be concluded that they acquired ownership on that date.

2- Does not constitute gratuitous transfer of property that may constitute a taxable fact within the scope of the normative provision of no. 1 of Article 1 of CIS the celebration of a public deed of justification of acquisition by adverse possession, with the aim of restarting successive dealing and proceeding to the registration of that property previously acquired, according to Article 34 of the Property Registration Code (….)"

1. Still in this Decision, the court reasoned for its decision, considering that: "Although acquisition by adverse possession constitutes an original acquisition (Article 1,287 et seq. of the Civil Code) for tax purposes, is considered as a gratuitous transfer of real estate property, and accordingly, subject to stamp tax according to Article 1 of CIS. It happens that, in this case, we do not have a gratuitous transfer of property, because no one can acquire what is already theirs. Indeed, it results from the proceedings that the Appellants did not acquire the property in question by adverse possession, since they had already acquired it by purchase and sale by public deed executed in 1972.

(…)

It should be noted that the validity of the contract of purchase and sale celebrated by public deed in 1972 is not called into question by the ATA. On the other hand, the requirement of form for its validity was respected, a public deed was executed as stipulated in Article 875 of the Civil Code for the purchase and sale of real estate.

(…)

That is, it is clear from the proceedings that there was no gratuitous transfer of property that may constitute a taxable fact within the scope of the normative provision of Article 1 of CIS."

(…)

Indeed, for the resolution of the present dispute, it is necessary to understand that although stamp tax falls, as a rule, on acts, it also falls on gratuitous transfer of property, being this latter the case at hand. Said another way, it is not a matter in the proceedings of knowing whether stamp tax is due on the act of public deed executed on 03/02/2006, but rather whether or not stamp tax is due on gratuitous transfer of property (final part of Article 1, no. 1 of CIS) which the ATA understands the deed evidences."

1. Also in the case at hand in these proceedings, for tax purposes, the property (land) had already been acquired by force of the celebration of the contract for deed of purchase and sale with delivery of the property, and by force of the provisions of tax law this acquisitive fact was taxed in Sisa, which the Claimant paid, as is proven in these proceedings and the ATA admitted as certain. Now, for the tax event provided in Article 1, no. 1 of CIS to occur, it is imperative that there has effectively been a gratuitous transfer of property, and as stated above, in this case such does not occur, since the ownership of the property (for all legally provided tax purposes) had already been transferred by force of the contract for deed of purchase and sale with delivery of the property, executed in 1979 and which the ATA taxed as an onerous acquisition in Sisa, levied in 1986 plus the corresponding compensatory interest, which the Claimant paid.

2. Thus, when in 2013 a notarial justification deed is celebrated for acquisition by adverse possession in order to regularize the situation in civil terms of the property, the tax event provided in Article 1, no. 1 and no. 3, paragraph a) of CIS does not occur, and in that measure the impugned levy is vitiated by violation of law by error regarding assumptions of law and fact, and should be annulled.

3. In these terms, the decision of the administrative complaint, partially granted, is also vitiated by illegality for the same grounds, and the IS levy underlying it should be revoked and annulled, with the legal consequences.

V - OF THE CLAIM AND THE RIGHT TO PAYMENT OF COMPENSATORY INTEREST

1. Article 24, no. 1, paragraph b) of the RJAT provides that the arbitral decision on the merits of a claim which is not subject to appeal or challenge binds the tax administration from the end of the period provided for appeal or challenge, and this administration must - in the exact terms of the substantiation of the arbitral decision in favor of the taxpayer and until the end of the period provided for voluntary execution of judgments of tax courts - restore the situation that would have existed if the tax act that is the object of the arbitral decision had not been made, adopting the acts and operations necessary for that purpose. This provision is in keeping with the provisions of Article 100 of the General Tax Law, applicable to the case by force of the provisions of paragraph a) of no. 1 of Article 29 of the RJAT, in which it is established that: "The tax administration is obliged, in case of total or partial substantiation of complaints or administrative appeals, or of judicial proceedings in favor of the taxpayer, to the immediate and full restoration of the situation that would have existed if the illegality had not been committed, including the payment of compensatory interest, according to the terms and conditions provided for in law."

2. Article 43, no. 1 of the General Tax Law provides, for its part, that "compensatory interest is due when it is determined, in administrative complaint or judicial review, that there was an error attributable to the services resulting in payment of the tax debt in an amount greater than legally due."

3. From the analysis of the probative elements contained in these proceedings, particularly from the Administrative Proceedings, it is possible to infer that, at least from the submission of the petition by the Claimant, exposing the reasons why he understood that the notarial justification for acquisition by adverse possession should not be subject to stamp tax, the ATA had knowledge of the factual elements, in essence, relevant to proceed with the correct levy of the tax. This same result follows from the documents attached to the arbitral petition and the information contained in the PA attached to the proceedings. Therefore, it had the possibility of revocation of the tax acts illegally made, which it could have made within the period for response to the present petition for arbitral pronouncement, which did not occur.

4. There is no doubt that the ATA had at its disposal sufficient information elements regarding the specific situation, reinforced by the submission of the administrative complaint, so that it had the possibility of correcting the error and of avoiding the making of the illegal and harmful tax act. That is the error for which it is obliged to make compensation.

5. Thus, in light of the provisions of Article 61 of the General Tax Procedures Code and considering that the requirements for the right to compensatory interest are met, that is, the existence of an error attributable to the services resulting in payment of the tax debt in an amount greater than legally due, as provided in no. 1 of Article 43 of the General Tax Law, the Claimant has the right to compensatory interest at the legal rate, calculated on the amount of €5,459.85 from the date on which payment of each installment of tax was made, until its complete reimbursement.

VI - DECISION

Given the foregoing, this Arbitral Tribunal decides:

A) To consider the arbitral claim totally substantiated, with the consequent annulment of the stamp tax levy for being vitiated by violation of law by error regarding the assumptions of fact and law underlying it;

B) To condemn the Respondent to reimburse the Claimant of the entire amount paid, in the amount of €5,459.85, plus compensatory interest, from the date on which payment of each installment of tax was made, at the legal rate, until complete payment;

C) To condemn the Respondent to payment of the costs of the present proceedings.

VII - VALUE OF THE PROCEEDINGS: In accordance with the provisions of Articles 305, no. 2 of the Code of Civil Procedure, Article 97-A, no. 1, paragraph a) of the General Tax Procedures Code and Article 3, no. 2 of the Regulations on Costs in Tax Arbitration Proceedings, the value of the proceedings is fixed at €5,459.85.

VIII - COSTS: Pursuant to the provisions of Article 22, no. 4 of the RJAT and in accordance with Table I annexed to the Regulations on Costs in Tax Arbitration Proceedings, the amount of costs is fixed at €612.00 to be borne by the Respondent.

Let it be noted and notified.

Lisbon, 21 October 2015

The sole arbitrator,

(Maria do Rosário Anjos)

[1] In this regard, regarding the evolution of the taxable base of this tax, see Pires, José Maria Fernandes, in Lessons in Taxation, Vol I, Work Coordinated by João Ricardo Catarino and Vasco Branco Guimarães, 2014, 4th edition, pages 403 et seq.

[2] See Pires, José Maria Fernandes, in op. cit., page 404.

[3] See Mateus, J. Silvério Dias and Freitas, L. Corvelo (2005) The Taxes on Real Estate Patrimony. Stamp Tax. Annotated and Commented, Engifisco, Lisbon, page 534.

[4] In this same sense the STA recently pronounced itself in the Decision of 17-06-2015, rendered in appeal no. 0353/15; in the same sense the Decisions of 21.05.2014, appeal 1676/13, of 17.12.2014, appeal 1198/14, of 14.05.2015, appeal 1422/14 all at www.dgsi.pt.