Summary
Full Decision
ARBITRAL DECISION
I – REPORT
On 27 February 2017, the company "A…, Lda.", with head office at Rua …, no. …, …-… Lisbon, registered at the Commercial Registry of Lisbon under the single registration number and collective person number … (hereinafter referred to as the "Claimant"), submitted to the Centre for Administrative Arbitration (CAAD) a request for the constitution of an arbitral tribunal with a view to obtaining an arbitral ruling, in accordance with the provisions of articles 2º, no. 1, subparagraph a), 3º, no. 1 and 10º of Decree-Law no. 10/2011, of 20 January (hereinafter referred to as RJAT), following the tax acts concerning the assessment of Stamp Tax (IS) for the year 2015, dated 5 April 2016, on each of the floors with independent use that make up the urban property registered under the article …, in the urban property registration matrix of the parish of …, of the municipality of Lisbon, in the total value of € 12,493.10 (twelve thousand, four hundred and ninety-three euros and ten cents).
In the request for arbitral ruling, the Claimant opted not to appoint an arbitrator.
Pursuant to no. 1 of article 6 and subparagraph b) of no. 1 of article 11 of RJAT, with the wording introduced by article 228 of Law no. 66-B/2012, of 31 December, the Deontological Council appointed the undersigned as sole arbitrator, who accepted the position within the legally stipulated period.
The arbitral tribunal was constituted on 17 May 2017.
On 05 June 2017, the Respondent, duly notified for that purpose, submitted its reply.
The meeting provided for in article 18 of RJAT, the production of arguments, as well as the waiver of submission of the administrative case, at the request of the Respondent, were dispensed with, to which the Tribunal acceded for reasons of procedural efficiency and expedition and the prohibition of the performance of useless acts, with neither of the Parties objecting.
The position of the Claimant, as expressed in the request for arbitral ruling, is, in summary, as follows:
The assessment acts subject to this arbitral ruling are vitiated by illegality regarding the legal assumptions and error regarding the factual assumptions.
In the case of a property such as that in the present case, which comprises floors or divisions with independent use, the subjection to stamp tax is determined, not by the total taxable property value (VPT) of the property, as is the understanding of the Respondent, but by the VPT attributed to each of its floors or divisions.
Moreover, having regard to the rules of the Code for Municipal Property Tax (CIMI) applicable to matters not regulated in the Stamp Tax Code respecting item 28 of the General Table (see article 67, no. 2 of the Stamp Tax Code), each floor or division of a property capable of independent use is considered separately in the property registration (see article 12, no. 3 of CIMI).
As such, since the VPT of any one of the sixteen residential units shown in the property register referred to in these proceedings, in accordance with CIMI, is less than € 1,000,000.00, stamp tax under item no. 28.1 of the General Stamp Tax Table (TGIS) does not apply to it.
In fact, the Respondent cannot sustain the understanding that the taxable event of item no. 28.1 of the TGIS is the failure to constitute a property such as that in the present case, consisting of sixteen residential units, in the horizontal property ownership regime, and that the legal form of property ownership cannot be determining for the occurrence of that taxable event.
Moreover, if the property in question were subject to horizontal property ownership, none of its residential units would be subject to the new stamp tax.
For this reason, the Claimant maintains that the prerequisites for the application of Item no. 28 of the TGIS are not satisfied, and that the Respondent has violated the most basic constitutionally enshrined rights, as well as the most elementary principles of reasonableness, legality and good sense, which are imperative in a rule of law state.
For all of the above reasons, the stamp tax assessments concerning the year 2015, in the total value of € 12,493.10, corresponding to the property in question, must be annulled, with all legal consequences.
The position of the Respondent as expressed in its reply is, in brief summary, as follows:
What is at issue are assessments that result from the direct application of item 28.1 of the TGIS, which provides that Stamp Tax is due on the ownership, usufruct or right of surface of urban properties whose taxable property value shown in the register, in accordance with CIMI, is equal to or exceeding € 1,000,000.00.
In fact, for purposes of stamp tax, the property as a whole is relevant, since divisions capable of independent use are not considered as property, but only autonomous units under a horizontal property ownership regime, as provided in no. 4 of article 2 of CIMI.
As such, the VPT on which the incidence of Stamp Tax under item 28.1 of the General Table depends had to be, and was, the global taxable property value of the property and not that of each of its independent parts.
The unity of the urban property in vertical ownership comprised of various floors or divisions is not, however, affected by the fact that all or some of those floors or divisions are capable of independent economic use. Such property does not cease to be a single one, and its distinct parts are therefore not legally equated to autonomous units under horizontal property ownership.
For this reason, the VPT on which the incidence of Stamp Tax under item 28.1 of the TGIS depends had to be the global VPT of the property and not that of each of its independent parts. The fact that the Municipal Property Tax (IMI) was calculated based on the VPT of each part of the property with independent economic use does not equally affect the application of item 28.1 of the TGIS.
In this line of reasoning, the Respondent concludes that the request for arbitral ruling is entirely without merit, and the legality of the act subject to the present proceedings is evident.
II – QUESTION TO BE DECIDED
In view of the foregoing, the principal question to be decided is as follows:
Are the tax acts concerning assessments of Stamp Tax under Item 28.1 of the General Table, Annex to the Stamp Tax Code, for the year 2015, dated 05 April 2016, on each of the floors with independent use that make up the urban property registered under the article …, in the urban property registration matrix of the parish of…, of the municipality of Lisbon, in the total value of € 12,493.10 (twelve thousand, four hundred and ninety-three euros and ten cents), issued by the Tax and Customs Authority, vitiated by any illegality.
III – PROCESSING
The Tribunal is properly constituted and is materially competent, in accordance with articles 2, no. 1, subparagraph a), 5, no. 2, and 6, no. 1, of RJAT.
The request for arbitral ruling is timely, in accordance with no. 1 of article 10 of RJAT.
The parties have legal standing and capacity, are legitimate and are legally represented, in accordance with articles 4 and 10, no. 2, of RJAT and article 1 of Regulatory Decree no. 112-A/2011, of 22 March.
The proceedings are not affected by any defects that would invalidate them.
Having considered all the above, it is appropriate to render a decision.
IV – FINDINGS OF FACT
Taking into account the documentary evidence submitted in the proceedings, it is now necessary to present the factual matters relevant to the understanding of the decision, which are established as follows:
The Claimant "A…, Lda." is the legitimate owner of the urban property registered under the article …, in the urban property registration matrix of the parish of …, in the municipality of Lisbon, constituted in full ownership with floors or divisions capable of independent use (see documents submitted to these proceedings as docs. nos. 1 and 2 annexed to the Arbitral Petition).
The Tax Authority attributed to the property in question, for purposes of applying Item 28.1 of the TGIS, the "taxable property value of the property – total subject to tax" of € 1,249,310.00 (one million, two hundred and forty-nine thousand, three hundred and ten euros) – (see stamp tax assessment acts for 2015 submitted to these proceedings as docs. nos. 3 to 43 annexed to the Arbitral Petition).
In accordance with the taxable property value attributed to the property in question, the Tax Authority proceeded with the respective stamp tax assessments based on Item 28.1 of the General Stamp Tax Table, dated 05 April 2016, notified to the Claimant in the total value of € 12,493.10 (twelve thousand, four hundred and ninety-three euros and ten cents), having determined the following partial payments for each floor or division capable of independent use:
| Property Registration | VPT | Tax Due |
|---|---|---|
| …-U-…-R/C EA | € 78,170.00 | € 781.70 |
| …-U-…-R/C B | € 41,780.00 | € 417.80 |
| …-U-…-R/C DC | € 41,780.00 | € 417.80 |
| …-U-…-R/C D | € 41,780.00 | € 417.80 |
| …-U-…-1º EA | € 81,340.00 | € 813.40 |
| …-U-…-1º B | € 48,840.00 | € 488.40 |
| …-U-…-1º DC | € 48,840.00 | € 488.40 |
| …-U-…-1º D | € 81,340.00 | € 813.40 |
| …-U-…-2º EA | € 81,340.00 | € 813.40 |
| …-U-…-2º B | € 48,840.00 | € 488.40 |
| …-U-…-2º DC | € 48,840.00 | € 488.40 |
| …-U-…-2º D | € 81,340.00 | € 813.40 |
| …-U-…-3º EA | € 160,220.00 | € 1,602.20 |
| …-U-…-3º B | € 102,320.00 | € 1,023.20 |
| …-U-…-3º DC | € 102,320.00 | € 1,023.20 |
| …-U-…-3º D | € 160,220.00 | € 1,602.20 |
(see Stamp Tax assessments submitted to these proceedings as docs. nos. 3 to 43 annexed to the Arbitral Petition).
The assessments referenced in the preceding section, corresponding to the 1st, 2nd and 3rd instalments, were – albeit in a different manner – fully paid by the Claimant (see documents submitted to these proceedings as docs. nos. 44 to 50 annexed to the Arbitral Petition).
The facts set out in the preceding section are uncontested matters and have been proven documentally in the proceedings.
There are no facts established as unproven, since all facts relevant to the appraisal of the request have been established as proven.
V – LEGAL GROUNDS
We shall now determine the law applicable to the underlying facts, in accordance with the question already stated (see above no. 10).
Thus, the question that arises is whether item 28.1 of the TGIS should be interpreted as providing, within its scope, properties in full ownership with parts or divisions capable of independent use, with residential allocation, which are characterized by the fact that none of those parts or divisions have been attributed a VPT equal to or exceeding € 1,000,000.00.
The subjection to Stamp Tax of properties with residential allocation resulted from the addition of Item 28 to the TGIS, carried out by article 4 of Law 55-A/2012, of 29 October, which typified the following taxable events, in accordance with the current wording:
"28 – Ownership, usufruct or right of surface of urban properties whose taxable property value shown in the register, in accordance with the Code for Municipal Property Tax (CIMI), is equal to or exceeding € 1,000,000.00 – on the taxable property value for purposes of Municipal Property Tax (IMI) (Added by article 4 of Law no. 55-A/2012 of 29 October):
28-1 – For residential property or land for construction whose planned or authorized construction is for residential purposes, in accordance with the provisions of the Code for Municipal Property Tax (IMI) (Wording of Law no. 83-C/2013 of 31 December) – 1%
28.2 – For property where the taxpayers who are not natural persons are resident in a country, territory or region subject to a clearly more favorable tax regime, listed in a regulatory decree approved by the Minister of Finance (Added by article 3 of Law no. 55-A/2012 of 29 October) – 7.5%."
This law came into force on the day following its publication, that is, on 30 October 2012.
However, Law 55-A/2012 says nothing about the qualification of the concepts involved, in particular, regarding the concept of "property with residential allocation" contained in Item 28.1.
In this regard, it is necessary to determine its true meaning, in accordance with the techniques and interpretive elements generally accepted by legal doctrine, in accordance with article 9 of the Civil Code and article 11 of the General Tax Law.
In this respect, regard must be had to the concept of property resulting from the provision in article 2 of the Code for Municipal Property Tax – "any parcel of territory, including waters, plantations, buildings and constructions of any nature incorporated therein or situated thereon, with a character of permanence, provided that it forms part of the assets of a natural or legal person and, in normal circumstances, has economic value, as well as waters, plantations, buildings or constructions, in the circumstances set out above, endowed with economic autonomy in relation to the land where they are located, even if situated in a parcel of territory that forms an integral part of assets that are different or do not have a patrimonial nature." – by reference from article 67, no. 2 of the Stamp Tax Code, added by the aforementioned Law, which provides that "to matters not regulated in this code relating to Item 28 of the General Table, the CIMI applies subsidiarily.", thus complying with the determination of the VPT according to the provisions of article 38 and following of the same code.
In the Code for Municipal Property Tax, reference should also be made to article 6, which indicates the different types of urban properties, among which it mentions residential ones in subparagraph a) of its no. 1, clarifying in its no. 2 that "residential, commercial, industrial or service buildings or constructions are those licensed for such purpose or, in the absence of a license, that have as their normal purpose each of these uses."
In an initial analysis, we can already conclude that the legislator was concerned with the normal use of the property, the purpose for which it is intended, and not with the rigor of the concept itself.
We can further add that "(…) for the legislator, the situation of the property in vertical or horizontal ownership was not relevant, since no reference or distinction is made between one and the other. What is relevant is the underlying material reality of its existence as an urban property and its use." An understanding expressly set out, which we adhere to, in the Arbitral Decision rendered in case no. 50/2013-T.
Thus, the legislator, in the rule of incidence of Item 28.1 of the TGIS, did not find it relevant to distinguish between properties in horizontal ownership and properties in vertical ownership. Therefore, we already advance that the argument put forward by the Respondent set out in article 6 of its Reply does not hold, when it states that "The interpretation underlying the assessment acts in question is that the taxable property value on which the incidence of stamp tax under item 28.1 of the General Stamp Tax Table depends had to be, as it was in the present case, the global taxable property value of the property and not that of each of its independent parts."
It is also important to note article 12, no. 3, of the Code for Municipal Property Tax, which provides that "each floor or part of a property capable of independent use is considered separately in the property registration, which also discriminates its respective taxable property value."
And also the provision of article 119, no. 1 of the Code for Municipal Property Tax, which provides that "The services of the General Directorate of Taxes send to each taxpayer, by the end of the month prior to the month of payment, the corresponding collection document, with discrimination of the properties, their parts capable of independent use, respective taxable property value and the tax collected for each municipality of the location of the properties."
Now, considering that registration in the property matrix of properties in vertical ownership, comprised of different parts, floors or divisions with independent use, in accordance with the Code for Municipal Property Tax, using the criterion already referred to in article 67, no. 2 of the Stamp Tax Code – "to matters not regulated in this code relating to Item 28 of the General Table, the CIMI applies subsidiarily." – complies with the same registration rules as properties constituted in horizontal ownership, and the respective Municipal Property Tax (IMI), as well as the Stamp Tax under Item 28.1, are assessed individually in relation to each of the parts, it is clear that if the legal criterion imposes the issuance of individualized assessments for the autonomous parts of properties in vertical ownership, in the same manner as it establishes for properties in horizontal ownership, the same must be observed for the definition of the rule of incidence of Stamp Tax under Item 28.1.
Taking into account what has been set out in the preceding points, the incidence of stamp tax only occurs if one of the parts, floors or divisions with independent use presents a VPT exceeding € 1,000,000.00, which in the present case does not occur, as shown in the urban property register of the property in question (see point 12, subparagraph A).
Therefore, the Tax Authority can never consider as the reference value for the incidence of stamp tax the total value of the property, when the legislator itself established a different rule under the Code for Municipal Property Tax. As mentioned, in accordance with that code, there is no difference between a building in horizontal ownership and a building in vertical ownership or full ownership comprised of parts or divisions capable of independent use – being this the code applicable to matters not regulated with respect to Item 28 of the TGIS (see article 67, no. 2 of Law 55-A/2012, of 29/10).
This equal treatment, which the legislator did not intend to include in the rule of incidence contained in Item 28.1 of the TGIS, it also established in article 119 of the Code for Municipal Property Tax, when it establishes that the tax should be assessed individually on each part or division capable of independent use, taking into account the VPT of each of those parts or divisions capable of independent use, individually considered. From which it follows that the VPT that should be considered in the application of Item 28.1 of the TGIS is that which results from the letter and spirit of articles 2, 6 no. 1 subparagraph a), 12 and 119, all of the Code for Municipal Property Tax.
It should be made clear that this conclusion is in line with the overwhelming majority of the known jurisprudence of CAAD (see, among many, Cases 544/2015-T, 552/2015-T, 554/2015-T, 560/2015-T, 562/2015-T, 573/2015-T, 576/2015-T, 581/2015-T, 589/2015-T, 597/2015-T, 606/2015-T, 632/2015-T, 643/2015-T, 644/2015-T, 651/2015-T, 659/2015-T, 681/2015-T, 718/2015-T, 755/2015-T, 768/2015-T, 777/2015-T, 10-2016-T, 20/2016-T.), and, in the same sense, cases nos. 661/2014-T, 705/2014-T and 115/2016-T, which found the requests to be entirely well-founded and annulled the stamp tax assessment acts assessed against the Claimant for 2012, 2013 and 2014.
Given what we have just set out, we cannot agree with, with all due respect, the position of the Respondent, since it is not acceptable that the criterion sought – considering the sum of the VPTs attributed to the parts, floors or divisions with independent use, with the argument that the property is not constituted under a horizontal property ownership regime – finds no legal support and is contrary to the criterion that is applicable under the Code for Municipal Property Tax and, by reference, under Stamp Tax law.
In the present case, the property in question is in full ownership and contains 16 floors and/or divisions with independent use, allocated for residential purposes, as was proven by document no. 2 attached to the Request for Arbitral Ruling, and none of those floors has a taxable property value equal to or exceeding € 1,000,000.00, as results from the document attached to the proceedings, from which it is concluded that the legal prerequisite for the incidence of Stamp Tax provided in Item 28.1 of the TGIS is not satisfied.
Finally, in addition to the annulment of the assessments and consequent reimbursement of the amounts unduly paid, the Claimant also petitions for the payment of the corresponding compensatory interest.
Pursuant to article 24, no. 5 of RJAT "interest is due, regardless of its nature, in accordance with the provisions of the general tax law and the Code of Tax Procedure and Process". This norm allows for the recognition of the right to compensatory interest in arbitral proceedings. Thus, the request is entertained.
In accordance with article 43, no. 1 of the General Tax Law, compensatory interest is due when it is determined, in an administrative complaint or judicial challenge, that there has been an error attributable to the Tax Authority's services from which results payment of the tax debt in an amount exceeding that legally due.
The right to compensatory interest referred to in the aforementioned provision of the General Tax Law presupposes that tax has been paid in an amount exceeding that due and that such is derived from an error, whether factual or legal, attributable to the Tax Authority's services (see Judgment of the Supreme Administrative Court, case no. 01215/12, of 10.04.2013).
In the present case, both conditions are satisfied, thus establishing the obligation of compensatory interest in favor of the Claimant, which is hereby declared.
VI – DECISION
In these terms, this Arbitral Tribunal decides:
a) That the Claimant's request is well-founded, the stamp tax assessment acts in question being deemed illegal, for violation of article 1, no. 1 of the Stamp Tax Code and Item 28.1 of the TGIS, and the aforementioned acts should be annulled, having in mind the fact that none of the parts or divisions capable of independent use, subject to the assessment acts that are the object of this arbitral ruling, has a taxable property value exceeding € 1,000,000.00, as was demonstrated in these proceedings;
b) Condemn the Respondent to reimburse the amounts unduly assessed and paid by the Claimant, based on article 1, no. 1 of the Stamp Tax Code and item 28.1 of the TGIS;
c) Further condemn the Respondent, since we are dealing with a defect relating to the tax law relationship, since the existence of this defect resulted in the injury of a legal situation, embodied in the imposition on the Claimant of the performance of a patrimonial obligation contrary to law, to the payment of compensatory interest, in accordance with the terms and conditions provided by law (see articles 43 and 100 of the General Tax Law and article 61 of the Code of Tax Procedure and Process).
The value of the case is fixed at € 12,493.10, in accordance with article 97-A, no. 1, a), of the Code of Tax Procedure and Process, applicable by virtue of subparagraphs a) and b) of no. 1 of article 29 of RJAT and no. 2 of article 3 of the Regulation of Costs in Tax Arbitration Proceedings.
The amount of costs is fixed at € 918.00, in accordance with Table I of the Regulation of Costs in Tax Arbitration Proceedings, to be paid by the Tax and Customs Authority, since the request was entirely well-founded, in accordance with articles 12, no. 2, and 22, no. 4, both of RJAT, and article 4, no. 4, of the aforementioned Regulation.
Let notice be given.
Lisbon, 25 October 2017.
The Arbitrator
(Jorge Carita)
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