Stamp Tax on Building Land (Verba 28.1 TGIS) – Tacit Rejection of Official Review Annulled

ARBITRAL DECISION

The arbitrators Dr. Jorge Manuel Lopes de Sousa (chair arbitrator), Prof. Doctor Diogo Feio and Prof. Doctor Fernando Borges de Araújo, appointed by the Ethics Council of the Administrative Arbitration Center to form the Arbitral Tribunal, constituted on 12-05-2016, agree as follows:

1. Report

A…, S.A., taxpayer no.…, with registered office at Street … no.…, …-… … (hereinafter briefly designated "Claimant") filed a petition for constitution of a collective arbitral tribunal, pursuant to articles 2, paragraph a), and 10, no. 1, paragraph a), of Decree-Law no. 10/2011, of January 20 (hereinafter "RJAT"), with a view to annulling the decisions of implied refusal of official revision requests it presented relating to the following Stamp Tax assessments:

a) Regarding the year 2012:

Assessment issued in 2012 identified with no. 2012 … (single instalment), in the amount of € 10,915.35;

b) Assessments issued in 2013:

i. Assessments identified with nos. 2013 … (first instalment) in the amount of € 7,276.90; 2013 … (second instalment) in the amount of € 7,276.90 and; 2013 … (third instalment) in the amount of € 7,276.90, in the aggregate amount of € 21,830.70;

ii. Assessment identified with no. 2013 … (single instalment) in the amount of € 26,138.30;

iii. Assessment identified with no. 2013 … (single instalment) in the amount of € 45,633.40;

iv. Assessment identified with no. 2013 … (single instalment) in the amount of € 11,197.30;

c) Assessments issued in 2014:

i. Assessments identified with nos. 2014 … (first instalment) in the amount of € 8,712.78; 2014 … (second instalment) in the amount of € 8,712.76, and; 2014 … (third instalment) in the amount of € 8,712.76, in the aggregate amount of € 26,138.30;

ii. Assessments identified with nos. 2014 … (first instalment) in the amount of € 15,211.14; 2014 … (second instalment) in the amount of € 15,211.13, and; 2014 … (third instalment) in the amount of € 15,211.13, in the aggregate amount of € 45,633.40;

iii. Assessments identified with nos. 2014 … (first instalment) in the amount of € 3,732.44; 2014 … (second instalment), in the amount of € 3,732.43; 2014 … (third instalment), in the amount of € 3,732.43; in the aggregate amount of € 11,197.30;

iv. Assessments identified with nos. 2014 … (first instalment), in the amount of € 7,276.90, 2014 … (second instalment) in the amount of € 7,276.90, and 2014 … (third instalment) in the amount of € 7,276.90, in the aggregate amount of € 21,830.70.

The petition for constitution of the arbitral tribunal was accepted by the President of CAAD and notified to the TAX AUTHORITY AND CUSTOMS SERVICE on 11-03-2016.

Pursuant to the provisions of paragraph a) of no. 2 of article 6 and paragraph b) of no. 1 of article 11 of the RJAT, the Ethics Council appointed the signatories as arbitrators, who communicated acceptance of their appointment within the applicable time period.

On 27-04-2016, the Parties were notified of this appointment, and neither expressed a will to refuse the appointment of the arbitrators, in accordance with the combined provisions of article 11, no. 1, paragraphs a) and b) of the RJAT and articles 6 and 7 of the Code of Ethics.

Thus, in conformity with the provision of paragraph c) of no. 1 of article 11 of the RJAT, the collective arbitral tribunal was constituted on 12-05-2016.

The Tax Authority and Customs Service responded by raising the exception of material lack of competence of the Arbitral Tribunal and defending the lack of merit of the claims.

By order of 16-06-2016, the hearing provided for in article 18 of the RJAT and the written submissions were dispensed with.

The Arbitral Tribunal was duly constituted.

The parties possess legal personality and capacity, are legitimate (arts. 4 and 10, no. 2, of the same instrument and art. 1 of Order no. 112-A/2011, of March 22) and are properly represented.

The proceedings do not suffer from any nullities.

It is necessary to first examine the issue of material lack of competence raised by the Tax Authority and Customs Service.

2. Issue of Material Lack of Competence

2.1. Positions of the Parties

The Tax Authority and Customs Service raised the issue of material lack of competence of this Arbitral Tribunal, on the grounds that the petition for arbitral decision is presented following the implied refusal of a petition for official revision.

The Tax Authority and Customs Service contends, in summary, as follows:

– Law no. 3-B/2010, of April 28 (State Budget for 2010), included in its article 124, a legislative authorization relating to arbitration in tax matters, providing that it should constitute an alternative procedural means to judicial contestation proceedings and to action for recognition of a right or legitimate interest enshrined in the CPPT;

– the petition for arbitral decision sub judice is directed, albeit indirectly, to the declaration of illegality of tax assessment acts, in this case Stamp Tax;

– Order no. 112-A/2011, of March 22, establishes in its article 2, paragraph a), that the Tax Authority is bound by arbitral claims that have as their object the examination of claims relating to taxes whose administration is entrusted to it, referred to in no. 1 of article 2 of the RJAT, "with the exception of claims relating to the declaration of illegality of acts of self-assessment, withholding at source and payment on account that have not been preceded by recourse to the administrative procedure in accordance with articles 131 to 133 of the Code of Tax Procedure and Process";

– article 2, paragraph b), of the aforementioned Order expressly excludes from the scope of the Tax Authority's binding submission to arbitral jurisdiction, "(…) Claims relating to acts of determination of the taxable base and acts of determination of the taxable matter, both by indirect methods, including the decision of the revision procedure";

– if one intended to include in the authorization granted the administrative procedure of official revision, such wording would appear manifestly unlawful because this interpretation flows from the literal element inherent in the legal norm in question and from other interpretative elements;

– if the legislator did not provide in article 2 of that Order for the official revision procedure as equivalent to recourse to the administrative procedure, particularly to the gracious complaint, in order to access the petition for arbitral decision, it was certainly because it did not intend to do so;

– the examination of the legality of administrative acts that do not entail examination of assessment acts has been excluded;

– this latter part of the provision cannot, under penalty of manifest illegality/unconstitutionality, be disregarded, interpreting the norm as if the specific reference to a particular administrative procedure did not exist, with the interpreter disregarding the distinction provided by the legislator.

The Claimant responded to the exception in its submissions, stating as follows, in summary:

– the formula of article 2, no. 1, paragraph a), of the RJAT admits the declaration of illegality of second and third degree acts;

– as results from the consistent case law of the SAC concerning the procedural means to use to react against the implied refusal of a petition for official revision of a tax act: "The act contested in court is the one that the Director-General required left undone in the time period at his disposal, and which, pursuant to article 57, no. 5 of the LGT, resulted in presuming the refusal of the petition for revision of the assessment that the applicant before him filed [...]." - Decision of the SAC, of 02-02-2005, rendered in case no. 1171/04;

– pursuant to SAC case law: "[...] by failing to rule on the applicant's claim, the respondent authority refused it, that is, did not recognize, in the assessment act in question, the illegalities that the applicant attributed to it. What is at issue, then, is indirectly the legality of the tax assessment act: examining the contested act - knowing whether the applicant's claim, that said act be revised, merited or did not merit being refused (albeit presumably) - entails reviewing the legality of the assessment" and therefore: "The appropriate procedural means to react judicially against the silent act attributed to a director-general who did not decide a petition for official revision of an assessment act of a tax is judicial contestation" - Decision of the SAC, of 08-07-2009, rendered in case no. 0306/09;

– the reference to the revision procedure contained in paragraph b) of article 2 of Order no. 112-A/2011 relates to the revision procedure of the taxable base.

2.2. Decision on the Issue of Lack of Competence

The competence of the arbitral tribunals functioning at CAAD is, in the first place, limited to the matters indicated in art. 2, no. 1, of Decree-Law no. 10/2011, of January 20 (RJAT).

In a second instance, the competence of the arbitral tribunals functioning at CAAD is also limited by the terms in which the Tax Administration was bound to that jurisdiction by Order no. 112-A/2011, of March 22, as art. 4 of the RJAT establishes that "the binding of the tax administration to the jurisdiction of the tribunals constituted in accordance with the present law depends on an order of the Government members responsible for the areas of finance and justice, which establishes, in particular, the type and maximum value of disputes covered".

In light of this second limitation on the competence of the arbitral tribunals functioning at CAAD, the resolution of the competence issue depends essentially on the terms of this binding, as, even if one is dealing with a situation framed within that art. 2 of the RJAT, if it is not covered by the binding, the possibility of the dispute being judicially decided by this Arbitral Tribunal will be excluded.

In paragraphs a) and b) of art. 2 of this Order no. 112-A/2011, there are expressly excluded from the scope of the Tax Administration's binding to the jurisdiction of the arbitral tribunals functioning at CAAD the "claims relating to the declaration of illegality of acts of self-assessment, withholding at source and payment on account that have not been preceded by recourse to the administrative procedure in accordance with articles 131 to 133 of the Code of Tax Procedure and Process" and the "claims relating to acts of determination of the taxable base and acts of determination of the taxable matter, both by indirect methods, including the decision of the revision procedure".

Paragraph a) of this article 2 has nothing to do with the situation presented in these proceedings, as it relates to acts of self-assessment, withholding at source and payment on account and, in the case at hand, assessment acts performed by the Tax Authority and Customs Service are being contested.

On the other hand, as the Claimant points out, the allusion to "revision procedure" in the context of a provision in which reference is made to acts of determination of the taxable base and taxable matter by indirect methods and it is stated that within the scope of the exclusion of competence is included the decision of the revision procedure, should be interpreted as referring to the decision of the "revision of the taxable base" procedure, provided for in article 91 of the LGT, as it is this that is included within the scope of the determination of the taxable matter and taxable base, and not the decision of the revision procedure of tax acts provided for in article 78 of the LGT.

Furthermore, the meaning of the legislative authorization on which the approval of the RJAT by the Government was based is that the competence of the arbitral tribunals functioning at CAAD should encompass the competence assigned to tax tribunals in judicial contestation proceedings (article 124, no. 2, of Law no. 3-B/2010, of April 28), including decisions refusing petitions for revision of the tax act and administrative acts that entail the examination of the legality of assessment acts [no. 4, paragraph a), of the same article].

For this reason, as the present proceedings involve the contestation of the implied refusal of a petition for revision of assessment acts, which is considered to have refused the Claimant's claim on substantive grounds, with a silent pronouncement to the effect of the lack of merit of the reasons invoked in the petition (as is consistent case law of the Supreme Administrative Court, examples of which are the decisions of 02-02-2005, rendered in case no. 1171/04, and of 08-07-2009, rendered in case no. 0306/09, cited by the Claimant) it is concluded that the examination of legality sought by the Claimant falls within the competence of this Arbitral Tribunal.

It must be concluded, therefore, that article 2, paragraph b) of Order no. 112-A/2011, duly interpreted on the basis of the criteria for interpretation of law provided for in article 9 of the Civil Code and applicable to substantive and procedural tax rules, by virtue of the provision of article 11, no. 1, of the LGT, does not preclude the filing of petitions for arbitral decision regarding assessment acts that have been preceded by a petition for official revision.

From this perspective, the issues of unconstitutionality raised by the Tax Authority and Customs Service on the basis of the erroneous interpretation it made of that provision do not arise, and their examination is therefore moot.

For the foregoing reasons, the exception raised by the Tax Authority and Customs Service lacks merit.

2. Matter of Fact

2.1. Proven Facts

The following facts are considered proven:

· The Claimant is a commercial company, whose corporate purpose consists of the promotion of real estate investment, the purchase and sale of rural and urban properties, their management, resale of those acquired by it and other operations connected permitted by law (Document no. 1 attached with the petition for arbitral decision, whose content is reproduced hereby);

· The Claimant was declared insolvent by a judgment rendered in case no. …/12….T…, by the Commercial Court of …, … Court of …, of … -…-2012 (doc no. 22 attached with the petition for arbitral decision, whose content is reproduced hereby);

· Within the scope of this insolvency proceeding, the Public Treasury claimed various credits, some of which it considers to be credits held on the insolvent estate and among which are found the credits referred to in this proceeding (document no. 23 attached with the petition for arbitral decision, whose content is reproduced hereby);

· The Tax Authority and Customs Service made the following Stamp Tax assessments, with the Claimant as the passive taxpayer, based on entry 28.1 of the General Table of the Stamp Tax (TGIS) (documents nos. 1 to 19 attached with the petition for arbitral decision, whose contents are reproduced hereby, taking into account that the property with registration article U-… corresponds to the former article…, registration article … corresponds to the former article … and registration article … corresponds to the former…, as shown in documents nos. 26, 27 and 28 attached with the petition for arbitral decision, whose contents are reproduced hereby):

· The properties referred to are building land (documents nos. 25 to 29 attached with the petition for arbitral decision, whose contents are reproduced hereby);

· The property with registration article U-… has different uses with the following maximum building areas: residential = 5,314.00 m²; commercial = 1,748.00 m²; parking = 3,000.00 m² (document no. 25 attached with the petition for arbitral decision, whose content is reproduced hereby);

· The property with registration article U-… has residential use (document no. 26 attached with the petition for arbitral decision, whose content is reproduced hereby);

· The property with registration article U-… has residential use (document no. 27 attached with the petition for arbitral decision, whose content is reproduced hereby);

· The property with registration article U-… has residential use (document no. 28 attached with the petition for arbitral decision, whose content is reproduced hereby);

· On 03-08-2015, the Claimant filed with the Tax Service of … a petition for official revision of the aforementioned Stamp Tax assessments (document no. 29 attached with the petition for arbitral decision, whose content is reproduced hereby);

· As some assessments relate to properties located in …, the Claimant sent a copy of the petition for official revision to the Tax Service of …, which received it on 10-08-2015 (doc no. 31 attached with the petition for arbitral decision, whose content is reproduced hereby);

· The Claimant did not pay the aforementioned assessments, and tax enforcement proceedings were instituted for the forcible collection of the assessed amounts;

· Until 02-03-2016, the Claimant was not notified of any decision regarding the petitions for official revision;

· On 02-03-2016 the Claimant filed the petition for constitution of the arbitral tribunal that gave rise to the present proceedings.

2.2. Unproven Facts

There are no facts relevant to the decision of the case that were not proven.

2.3. Justification for the Determination of the Matter of Fact

The facts were proven on the basis of the documents attached with the petition for arbitral decision and with the administrative file.

The years to which the various assessments relate are those indicated in the table referred to in paragraph D), as shown by the assessments themselves, although these are made in the respective following year.

3. Matter of Law

The Stamp Tax assessments whose illegality is discussed in the present proceedings are based on entry 28.1 of the TGIS, which was added by Law no. 55-A/2012, of October 29.

The text of this entry 28.1 was amended by Law no. 83-C/2013, of December 31, but the assessments that are the subject of the petition for arbitral decision, issued in the years 2012, 2013 and 2014, relate to tax for the years 2012 and 2013, when the initial text was in effect.

The Tax Authority and Customs Service understood that that entry 28.1, in the initial text in effect in the years 2012 and 2013, applies to building land.

This issue has already been examined in various arbitral decisions to the effect that the application of entry 28.1, in its initial text, to building land is unlawful, and consistent case law of the Supreme Administrative Court also follows this line, as can be seen, among many, from the following decisions:

– of 02-07-2014, case no. 0467/14, in which it was held that "in the year 2012 a building land cannot be taxed under Stamp Tax (Entry 28.1 of the TGIS, in the wording of Law no. 55-A/2012, of October 29), as urban properties with residential use";

– of 23-04-2014 and of 14-01-2015, cases nos. 0272/14 and 0541/14, respectively, in which it was held that "as the legislator has not defined the concept of 'urban properties with residential use', and resulting from article 6 of the Real Estate Tax Code – subsidiarily applicable to the Stamp Tax provided for in the new entry no. 28 of the General Table – there is a clear distinction between 'residential urban properties' and 'building land', the latter cannot be considered, for purposes of the incidence of Stamp Tax (Entry 28.1 of the TGIS, in the wording of Law no. 55-A/2012, of October 29), as urban properties with residential use".

Law no. 55-A/2012, of October 29, made various amendments to the Stamp Tax Code and added to the TGIS entry 28, with the following text:

28 – Ownership, usufruct or right of superficies of urban properties whose taxable asset value as shown on the matrix, in accordance with the Real Estate Tax Code (CIMI), is equal to or greater than € 1,000,000 – on the taxable asset value used for purposes of Real Estate Tax:

28.1 – For property with residential use – 1 %;

28.2 – For property, when the passive taxpayers who are not natural persons are resident in a country, territory or region subject to a clearly more favorable tax regime, listed in the list approved by order of the Minister of Finance – 7.5 %.

In the transitional provisions contained in article 6 of that Law no. 55-A/2012, the following rules relating to the assessment of the tax provided for in that entry were established:

1 – In 2012, the following rules shall be observed with reference to the assessment of the stamp tax provided for in entry no. 28 of the respective General Table:

a) The taxable event occurs on October 31, 2012;

b) The passive taxpayer of the tax is the one mentioned in no. 4 of article 2 of the Stamp Tax Code on the date referred to in the preceding paragraph;

c) The taxable asset value to be used in the assessment of the tax corresponds to what results from the rules provided for in the Real Estate Tax Code with reference to the year 2011;

d) The assessment of the tax by the Tax Authority and Customs Service must be made by the end of November 2012;

e) The tax must be paid in a single instalment by the passive taxpayers until December 20, 2012;

f) The applicable rates are as follows:

i) Properties with residential use assessed in accordance with the Real Estate Tax Code: 0.5 %;

ii) Properties with residential use not yet assessed in accordance with the Real Estate Tax Code: 0.8 %;

iii) Urban properties when the passive taxpayers who are not natural persons are resident in a country, territory or region subject to a clearly more favorable tax regime, listed in the list approved by order of the Minister of Finance: 7.5 %.

2 – In 2013, the assessment of the stamp tax provided for in entry no. 28 of the respective General Table shall apply to the same taxable asset value used for purposes of the real estate tax assessment to be made in that year.

3 – Non-delivery, in whole or in part, within the indicated time period, of the amounts assessed as stamp tax constitutes a tax violation, punished in accordance with the law.

In the aforementioned entry 28.1 and in sub-paragraphs i) and ii) of paragraph f) of no. 1 of article 6 of Law no. 55-A/2012, a concept is used that is not used in any other tax legislation in these precise terms, which is that of "property with residential use".

Namely in the CIMI, which in various provisions of the Stamp Tax Code introduced by that Law indicates the tax instrument as subsidiary application regarding the tax provided for in that entry no. 28 [articles 2, no. 4, 3, no. 3, paragraph u), 5, paragraph u), 23, no. 7, and 46 and 67 of the Stamp Tax Code], a concept with that designation is not used.

Law no. 83-C/2013, of December 31, amended that entry no. 28.1, giving it the following text:

28.1 - For residential property or for building land whose construction, authorized or planned, is for residential purposes, in accordance with the provisions of the Real Estate Tax Code – 1 %

3.1.1. Concepts of Properties Used in the Real Estate Tax Code

In the Real Estate Tax, the types of properties are enumerated in its articles 3 to 6 as follows:

Article 2

Concept of Property

1 – For purposes of this Code, property is any portion of territory, encompassing waters, plantations, buildings and constructions of any nature incorporated in or sitting on it, with a character of permanence, provided it forms part of the patrimony of a natural or legal person and, in normal circumstances, has economic value, as well as waters, plantations, buildings or constructions, in the previous circumstances, endowed with economic autonomy in relation to the land on which they are located, although located in a portion of territory that constitutes an integral part of a different patrimony or does not have a patrimonial nature.

2 – Buildings or constructions, although movable by nature, are deemed to have a character of permanence when devoted to non-transitory purposes.

3 – The character of permanence is presumed when the buildings or constructions are situated in the same location for a period greater than one year.

4 – For purposes of this tax, each autonomous unit, under the horizontal property regime, is deemed to constitute a property.

Article 3

Rural Properties

1 – Rural properties are lands situated outside an urban center that are not to be classified as building land, in accordance with no. 3 of article 6, provided that:

a) They are devoted to or, in the absence of specific dedication, have as normal destination a use generating agricultural income, such as those considered for purposes of personal income tax (IRS);

b) Having no dedication as indicated in the preceding paragraph, they are not constructed or have only buildings or constructions of an ancillary character, without economic autonomy and of reduced value.

2 – Rural properties also include lands situated within an urban center, provided that, by force of lawfully approved provision, they cannot have use generating any income or can only have use generating agricultural income and are in fact being so devoted.

3 – Further rural properties include:

a) Buildings and constructions directly devoted to the production of agricultural income, when located on the lands referred to in the preceding numbers;

b) Waters and plantations in the situations referred to in no. 1 of article 2.

4 – For purposes of this Code, urban centers are considered, in addition to those situated within legally fixed perimeters, nuclei with a minimum of 10 housing units served by streets of public use, with their perimeter delimited by points distanced 50 m from the axis of the streets, in the transverse direction, and 20 m from the last building, in the direction of the streets.

Article 4

Urban Properties

Urban properties are all those that should not be classified as rural, without prejudice to the provisions of the following article.

Article 5

Mixed Properties

1 – Whenever a property has both rural and urban parts it is classified, in its entirety, in accordance with the main part.

2 – If neither of the parts can be classified as main, the property is deemed mixed.

Article 6

Types of Urban Properties

1 – Urban properties are divided into:

a) Residential;

b) Commercial, industrial or for services;

c) Building land;

d) Others.

2 – Residential, commercial, industrial or for services are buildings or constructions licensed for such purposes or, in the absence of a license, that have such purposes as their normal destination.

3 – Building land is considered to be lands situated within or outside an urban center for which a license or authorization has been granted, a prior notice admitted or favorable prior information issued for a subdivision or construction operation, and also those that have been declared as such in the acquisition title, except for lands where the competent entities prohibit any of those operations, namely those located in green areas, protected areas or which, in accordance with municipal land use plans, are devoted to public spaces, infrastructure or facilities. (Wording of Law no. 64-A/08, of 31-12)

4 – The provision of paragraph d) of no. 1 includes lands situated within an urban center that are not building land nor are covered by the provision of no. 2 of article 3 and also buildings and constructions licensed or, in the absence of a license, that have as their normal destination other purposes than those referred to in no. 2 and also those of the exception of no. 3.

3.1.2. Rules on Interpretation of Laws

Article 11 of the General Tax Law establishes the essential rules for the interpretation of tax laws as follows:

Article 11

Interpretation

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 tax provisions employ terms specific to other branches of law, they shall be interpreted in the same sense as they have there, unless otherwise directly stated in the law.

3. Should doubt persist regarding the meaning of the applicable incidence rules, the economic substance of the tax facts shall be considered.

4. Gaps resulting from tax provisions covered by the reservation of law of the National Assembly are not susceptible to analogical integration.

The general principles for the interpretation of laws, to which no. 1 of article 11 of the LGT refers, are established in article 9 of the Civil Code, which establishes the following:

Article 9

Interpretation of Law

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

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

3. In determining the meaning and scope of the law, the interpreter shall presume that the legislator established the most appropriate solutions and was able to express its thought in adequate terms.

3.1.3. Hypotheses for Interpreting the Concept of "Property with Residential Use"

As can be seen from the provisions of the CIMI transcribed above, the concept of "property with residential use" is not used in the classification of properties.

Nor is this concept found, with this terminology, in any other instrument.

Thus, in the absence of exact terminological correspondence between the concept of "property with residential use" and any other used in other instruments, several interpretative hypotheses can be considered.

The starting point for the interpretation of that expression "properties with residential use" is, naturally, the text of the law, and it is on the basis of it that the "legislative thought" must be reconstructed, as required by no. 1 of article 9 of the Civil Code, applicable by virtue of the provision of article 11, no. 1, of the LGT.

3.1.4. Concept of "Property with Residential Use" as Referring to Residential Properties

The concept closest to the literal meaning of this expression used is manifestly that of "residential properties", defined in no. 2 of article 6 of the CIMI as encompassing "buildings or constructions" licensed for residential purposes or, in the absence of a license, that have residential purposes as their normal destination.

If the expression "property with residential use" is understood to coincide with that of "residential properties", it is manifest that the assessments will be vitiated by error regarding the factual and legal prerequisites, as all the properties relative to which Stamp Tax was assessed under the aforementioned entry no. 28.1 are building land, without any building or construction, required by that no. 2 of article 6 to meet that concept of "residential properties".

For this reason, if the interpretation that "property with residential use" means "residential property" is adopted, the assessments whose illegality is claimed will be illegal, because there is no building or construction on any of the lands.

However, the non-coincidence of the terms of the expression used in entry no. 28.1 of the TGIS with that extracted from no. 2 of article 6 of the CIMI suggests that it was not intended to use the same concept.

3.1.5. Concept of "Property with Residential Use" as Distinct from "Residential Properties"

The word "use" (afectação), in this context of utilization of a property, has the meaning of "action of destining something to a particular use".

"When, as is usually the case, the provisions (legislative formulas) allow for more than one meaning, then the positive function of the text is expressed in giving stronger support to or more strongly suggesting one of the possible meanings. For among the possible meanings, some will correspond to the most natural and direct meaning of the expressions used, whereas others will only fit within the verbal framework of the provision in a forced, distorted way. 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 in particular to its technical-legal meaning, under the supposition (not always exact) that the legislator was able to express its thought correctly".

The relevance of the text of the law is especially emphasized in the matter of interpretation of provisions on the incidence of Stamp Tax, which are reduced to an amalgamation, under a common denomination, of an incongruous set of taxes of completely different natures (on income, on expenditure, on patrimony, on acts, etc.), which leaves little room for application of the primary interpretative criterion, which is the unity of the legal system, which calls for its global coherence.

The recognized lack of coherence of Stamp Tax is particularly exuberant in the case of this entry no. 28.1, hastily included on the margins of the General State Budget, by a tax legislator without perceptible overall tax guidance, which is successively implementing rules of tax increases as a result of budget execution setbacks, the impositions of international institutional creditors (represented by the "troika") and the scrutiny of the Constitutional Court.

In fact, although in the "Statement of Reasons" of the Bill no. 96/XII/2nd ([3]), on which Law no. 55-A/2012 was based, reference is made to the praiseworthy concern of the Government to "strengthen the principle of social equity in austerity, ensuring an effective distribution of the necessary sacrifices to fulfill the adjustment program" and to its commitment "to ensuring that the distribution of those sacrifices will be made by all and not just by those who live from the income of their work", it is manifest, on the one hand, that those reasons of equity, certainly existing, did not begin to apply in mid-2012, already existing at the beginning of the year, when the General State Budget entered into effect, and on the other hand, that the scope of entry no. 28.1, in taxing additionally properties with residential use and not also properties without it, reveals that concerns for social equity and the proclaimed intention to distribute sacrifices among all reaches much more some than truly everyone.

In this context, in the absence of certain interpretative elements that would permit detection of legislative coherence in the solution adopted in the aforementioned entry no. 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 the same no. 3 of article 9, that the legislator was able to express its thought in adequate terms.

Given the meanings of the words "use" (afectação) and "to dedicate" (afectar), which are "to give destination" or "to apply", the formula used in that entry no. 28.1 of the TGIS manifestly encompasses properties that have already been given the destination of residential use, properties that are already applied to residential purposes, and it is therefore necessary to inquire whether it also encompasses properties that, although not yet applied to residential purposes, are destined for such purposes.

To this end, it will be necessary to clarify when a property can be understood to be devoted to a residential purpose, namely whether it is when such destination is fixed for it in a subdivision permit or licensing act or similar, or only when the actual attribution of that destination is concretized.

From the outset, the comparison of entry no. 28.1 of the TGIS with no. 2 of article 6 of the CIMI, which defines the concept of residential properties, points to the need for an actual dedication.

In fact, a building or construction licensed for residential purposes or, even without a license, but having residential purposes as its normal destination, is, under no. 2 of that article 6, a residential property, as that provision classifies as such "buildings or constructions licensed for such purposes or, in the absence of a license, that have such purposes as their normal destination".

For this reason, on the assumption that the legislator of Law no. 55-A/2012 was able to express its thought in adequate terms (as required by article 9, no. 3, of the Civil Code to be presumed), if it intended to refer to those properties already licensed for residential purposes or that have residential use 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 CIMI.

Consequently, it must be presumed that the use of a different expression is intended to convey a different reality, and therefore, in good hermeneutics, "property with residential use" cannot be a property merely licensed for residential use or destined for such purposes (that is, it will not be enough that it be a "residential property"), but must be a property that already has actual dedication to that purpose.

That this is the meaning of the expression "use" (afectação), in the same context of property classification that the CIMI provides, is confirmed by article 3 in which, regarding rural properties, reference is made to those "devoted to or, in the absence of concrete dedication, have as normal destination a use generating agricultural income", which shows that dedication is concrete, actual. In fact, as can be seen from the final part of this text, a property may have as its destination a particular use and be or not be devoted to it, which shows that dedication is, at the level of the connection of a property to a particular use, something more intense than mere destination and may or may not occur, downstream of this and not upstream.

Moreover, the text of the law, in adopting the formula "property with residential use" instead of "urban properties with residential use", which appears in the aforementioned "Statement of Reasons", strongly suggests that the dedication to residential use must already be concretized, for only then will the property be in that dedication.

In the case at hand, one is dealing with a reality even more distant from residential use which is that of not even having any building or construction, and therefore one cannot consider existing a dedication that presupposes its existence.

On the other hand, the legislative intent not to extend the scope of application to construction land was expressly stated by the Government when it presented Bill 96-XII to the Assembly of the Republic, saying, through the voice of the Secretary of State for Tax Affairs:

"First, the Government proposes the creation of a special tax to tax high-value residential urban properties. It is the first time that in Portugal a special tax has been created on high-value properties intended for residential purposes. This rate will be 0.5% to 0.8% in 2012, and 1% in 2013, and will apply to houses valued at equal to or greater than 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".

The express reference to "houses" as the target of the incidence of the new tax leaves no room for doubt about the legislative intent.

On the other hand, there is no reference to "building land" in the discussion of the aforementioned Bill.

As regards article 45 of the CIMI, it has no relation to the classification of properties and only indicates the factors to be considered in the valuation of building land. What is considered there, in reference to the "building to be constructed", is the consideration of the destination of the land, which, as was seen, is something that, in the context of the CIMI, does not imply dedication and occurs before it.

Law no. 83-C/2013, of December 31, contrary to what the Tax Authority and Customs Service argues, was not intended to clarify the logical element underlying the initial wording of entry no. 28.1, but instead indirectly confirmed the interpretation that it did not encompass building land.

In fact, if the primitive wording of that entry no. 28.1, in speaking of "property with residential use", already intended to encompass buildings and constructions constituting "residential properties" (as defined in article 6, no. 2, of the CIMI), and building land for which residential use was authorized or planned, it would be natural that an interpretative nature be attributed to the new wording, similar to what Law no. 83-C/2013 does in other provisions [article 177, no. 7, regarding paragraphs a) and b) of no. 3 of article 17-A of the Personal Income Tax Code, and article 185, no. 1, regarding article 3-A of the Value Added Tax Code] and is usual in budget laws, when it is intended that new wordings apply to situations potentially encompassed by the previous wordings.

For this reason, the fact that an interpretative nature was not attributed to the new wording points to the intention to alter the scope of application of that entry no. 28.1 of the TGIS rather than maintain it, merely clarifying it.

For the foregoing reasons, the contested assessments, relating to Stamp Tax for the years 2012 and 2013, are vitiated by a defect consisting of error regarding the legal prerequisites, embodied in violation of entry no. 28.1 of the TGIS, which justifies their annulment (article 135 of the Administrative Procedure Code).

3.2. Issues That Are Moot

Given that the contested assessments must be annulled due to a defect that precludes their renewal, the examination of the remaining defects alleged against them becomes moot, being unnecessary.

4. Decision

For these reasons, this Arbitral Tribunal agrees to

– hold the petition for arbitral decision to be well-founded;

– annul the implied refusal of the petition for official revision of the Stamp Tax assessments nos. 2012…, 2013 … - 1st instalment, 2013 … - 2nd instalment, 2013 … - 3rd instalment, 2013…, 2014 … - 1st instalment, 2014 … - 2nd instalment, 2014 … - 3rd instalment, 2013…, 2014 … - 1st instalment, 2014 … – 2nd instalment, 2014 … – 3rd instalment, 2013..., 2014 … – 1st instalment, 2014 … - 2nd instalment, 2014…- 3rd instalment, 2014 …- 1st instalment, 2014…- 2nd instalment, 2014…- 3rd instalment

– annul the aforementioned assessments.

5. Value of the Proceeding

In accordance with the provisions of article 306, no. 2, of the Code of Civil Procedure, article 97-A, no. 1, paragraph a), of the Code of Tax Procedure and Process and article 3, no. 2, of the Regulation of Costs in Tax Arbitration Proceedings, the value of the proceeding is set at € 220,514.75.

6. Costs

Pursuant to art. 22, no. 4, of the RJAT, the amount of costs is set at € 4,284.00, in accordance with Table I attached to the Regulation of Costs in Tax Arbitration Proceedings, to be borne by the Respondent.

Lisbon, 01-09-2016

The Arbitrators

(Jorge Manuel Lopes de Sousa)

(Diogo Feio)

(Fernando Borges de Araújo)

[1] Dictionary of Contemporary Portuguese Language of the Lisbon Academy of Sciences, Volume I, page 102.

The Houaiss Dictionary of the Portuguese Language defines "use" (afectação), in a context close to this, as "act that gives destination to a public asset".

The Great Dictionary of the Portuguese Language, by JOSÉ PEDRO MACHADO, indicates "to destine" and "to apply" among the meanings of "to dedicate" (afectar).

[2] BAPTISTA MACHADO, Introduction to Law and the Discourse of Legitimation, page 182.

[3] Bill no. 99/XII/2nd is available at:
http://www.parlamento.pt/ActividadeParlamentar/Paginas/DetalheIniciativa.aspx?BID=37245

[4] Other provisions of the CIMI make it clear that the term "use" (afectação) is used to reference already existing situations and not merely future ones, even if foreseeable, like "destination" (destino).

This is the case of article 9 of the CIMI, which, after establishing that "the tax is due from" "the 4th year following, inclusive, that in which a building land has begun to appear on the inventory of a company whose purpose is the construction of buildings for sale" or "the 3rd year following, inclusive, that in which a property has begun to appear on the inventory of a company whose purpose is its sale" [paragraphs d) and e) of no. 1], determines that "for purposes of the provisions of paragraphs d) and e) of no. 1, the passive taxpayers must communicate to the tax service of the area where the properties are located, within a period of 60 days from the occurrence of the fact determining its application, the dedication of the properties to those purposes".

The "dedication of the properties to those purposes", in the context of this article 9, is reduced to the concrete assignment to the properties of the purpose "for sale", materialized by their inventory, it not being enough that they have been constructed or acquired with a view to their sale.

[5] Page 32 of the Official Gazette of the Assembly of the Republic, no. 9 of the 2nd Legislative Session of the XII Legislature, relating to the Plenary Meeting of 10-10-2012, available at

http://app.parlamento.pt/darpages/dardoc.aspx?doc=6148523063446f764c324679626d56304c334e706447567a4c31684a5355786c5a79394551564a4a4c305242556b6c42636e463161585a764c7a497577716f6f6c4d6a42545a584e7a77364e764a5449775447566e61584e7359585270646d4576524546534c556b744d4441354c6e426b5a673d3d&nome=DAR-I-009.pdf

[6] In this sense the Supreme Administrative Court has decided, as can be seen from the decisions of 09-04-2014, rendered in cases nos. 01870/13 and 048/14, and of 23-04-2014, rendered in cases nos. 0271/14, 0270/14 and 0272/14, available at http://www.dgsi.pt/jsta.nsf/2eae0bd4de5026e80256b480065970d?CreateDocument