Summary
Full Decision
ARBITRAL DECISION
I – REPORT
1 – A…, SA NIPC[1]…, with registered office at Rua … no…, …-…– Porto, submitted on 01/03/2017 a petition for constitution of the arbitral tribunal, pursuant to the provisions of paragraph a) of no. 1 of article 2, of no. 1 of article 3 and of paragraph a) of no. 1 of article 10, all of the RJAT[2], requesting the ATA[3], with a view to examining the legality of the tax assessment acts for Stamp Duty[4] (IS), as per the collection documents identified in the petition and which are hereby deemed fully reproduced, relating to the year 2015, inciding on a building with storeys and divisions with independent use located at Rua …, … and … registered in the urban property register under article … of the parish of …, area of the … Finance Service of the municipality of Porto.
2 – The petition for constitution of the arbitral tribunal was made without exercising the option of appointing an arbitrator, and was accepted by His Excellency the President of CAAD[5] and automatically notified to the ATA on 01/03/2017.
3 – In accordance with the provisions of no. 1 of article 6 of the RJAT, by decision of His Excellency the President of the Ethics Council, duly communicated to the parties within the legally applicable time limits, Arlindo José Francisco was appointed as arbitrator, who communicated to the Ethics Council and to the Administrative Arbitration Centre his acceptance of the mandate within the regularly established time limit.
4 – The tribunal was constituted on 15/05/2017 in accordance with the provisions contained in paragraph c) of no. 1 of article 11 of the RJAT, as amended by article 228 of Law no. 66-B/2012 of 31 December.
5 – By means of its petition, the claimant seeks the declaration of illegality of the tax assessment acts for Stamp Duty, already referred to, from item 28 of the General Table of Stamp Duty (TGIS)[6] which incided on the taxable real estate value of the parts or independent units of the property already identified with residential use, all as better appears in the respective petition.
6 – It invokes for this purpose, in summary, the following:
6.1 – There being error as to the factual assumptions and lack of legal foundation of the tax assessment acts for Stamp Duty here challenged, since the property on which they incided does not have exclusively residential use, as it has parts devoted to commercial activities, whereby the administrative appeal should have been considered well-founded.
6.2 – There being violation of law - item 28.1 of the TGIS, since the ATA makes an erroneous interpretation and application of item 28.1 of the TGIS, violating the principle of material truth over juridical-formal reality.
6.3 – It further considers that the said assessment acts violate article 24 no. 1, paragraph d) of the RJAT, in that the ATA disregards arbitral decisions favourable to the claimant, by which it is bound and should, therefore, refrain from executing the said assessment acts.
6.4 – For the foregoing the ATA should be condemned to refund to the claimant the Stamp Duty wrongfully paid as well as the amounts paid within the scope of tax enforcement proceedings, including default interest and costs, all increased by indemnity interest, calculated on the amounts paid, from the date of payment until the date of reimbursement.
7 – In turn the ATA understands:
7.1 – That the claimant has no grounds, since it is relevant for the incidence of Stamp Duty the total taxable real estate value of the urban property and not the taxable real estate value of each part that compose it even if susceptible of independent use.
7.2 – The ATA further states that a property in full ownership and a property in condominium ownership have different valuation and taxation from which different legal effects ensue; whereas in condominium ownership there is a division of full ownership and autonomy of each of the shares, in property in full ownership there is a single legal reality;
7.3 – Each part susceptible of independent use is not autonomous, per register, possessing a discretion of the property in its entirety;
7.4 – It concludes that item 28.1 of the TGIS applies to urban properties with residential use, that the property in question has a value exceeding €1,000,000.00, whereby the assessments here challenged do not suffer from any illegality, the dismissal order of the administrative appeal as well as the impugned acts should be upheld, as they are legal, absconding the respondent of the petition.
II – PRELIMINARY MATTERS
The tribunal was regularly constituted and is competent ratione materiae, in accordance with article 2 of the RJAT.
The parties have legal personality and capacity, demonstrate themselves legitimate and are regularly represented in accordance with articles 4 and 10 no. 2 of the RJAT and article 1 of Ordinance no. 112-A/2011, of 22 March.
In its reply, the TA, considered that only a matter of law was at issue and requested exemption from holding the meeting provided for in article 18 of the RJAT.
The tribunal issued on 06/06/2017 the following order: "Notify the claimant, to pronounce itself, if it wishes, within 10 days, on the respondent's proposal to exempt the meeting provided for in article 18 of the RJAT.
Notify also the parties to pronounce themselves, if they wish, within the same time limit, on the unnecessity of the production of oral or written submissions, since their positions are perfectly defined."
On 12/06/2016 a motion was submitted by the claimant and on 26/06/2017, the following order was issued: "Having examined the case file, it is verified that the claimant agrees with the unnecessity of the meeting of article 18 of the RJAT raised in the respondent's reply, as well as the production of submissions whether oral or written.
The tribunal considers that the conditions are met to issue a decision, setting the 14th of July next for that purpose, and the claimant must, by that date, furnish proof to CAAD of payment of the subsequent arbitration fee."
Thus, as the case does not suffer from nullities, no questions having been raised that impede the examination of the merits of the case, we consider the conditions to be met for a decision to be issued.
IV – GROUNDS
1 – Question to be decided in the present case
a) To know whether the administrative appeal should or should not have been considered well-founded.
b) To know whether the assessments here challenged are or are not illegal by violating item 28.1 of the TGIS and article 24 no. 1 of the RJAT.
c) In the event the petition is well-founded whether or not indemnity interest shall be due on the Stamp Duty wrongfully paid, as well as the amounts paid within the scope of tax enforcement proceedings, including the respective costs.
2 – Matters of fact
The relevant matter of fact proven based on the elements attached to the case file is as follows:
a) The claimant was, on 31 December 2015, owner of the properties located at street …, … and …, which includes street … nos … to …, with registration in the urban property register of the parish of … under article U-…, area of the second finance service of the city of Porto.
b) The property is constituted in the regime of condominium or full ownership, composed of seven storeys and nineteen storeys susceptible of independent use, some intended for commerce and others for habitation.
c) The total taxable real estate value of the said property register article was on 31 December 2015 of €2,324,780.00, and the sum of the divisions or storeys susceptible of independent use, with residential purposes, was on the same date €1,679,560.00.
d) The taxable real estate value of each of the divisions or storeys, susceptible of independent use, intended for habitation varies between €104,710.00 and €105,760.00, individually determined in the respective register and as appears well below the value of €1,000,000.00, provided for in item 28.1 of the TGIS.
e) The claimant was notified of the assessment acts for Stamp Duty provided for in the TGIS, item 28.1, relating to the year 2015, determined individually on the taxable real estate value of the parts or storeys susceptible of independent use with residential destination, for payment in three instalments, with due dates in April, July and November 2016.
f) Not agreeing with the assessments it submitted an administrative appeal on 13/06/2016 which came to be dismissed, as per notification of 23 November 2016.
g) Meanwhile, as the appeal does not suspend, of itself, the collection process, the competent tax enforcement proceedings were instituted by the ATA, therein proceeding to credit compensation, as can be seen from the documents attached to the case file of credit application and account adjustment.
No other facts were verified as not proven with relevance for the decision of the case.
3 – On the Law
3.1 – On the legality of the assessments and the well-foundedness of the appeal
a) The issue to be resolved, in order to assess the legality of the assessments here in question, is to know whether in accordance with the provisions of item 28.1 of the TGIS one should or should not consider the sum of the taxable real estate value of each of the parts or divisions susceptible of independent use, since none of them has value equal to or greater than €1,000,000.00 or, if we should consider its individual taxable real estate value, for purposes of taxation in Stamp Duty.
b) The claimant sustains the annulment of the assessments on the fact that the same violate item 28.1 of the TGIS and also article 24 no. 1 paragraph d) of the RJAT.
c) As to the violation of item 28.1, we need to know what is the concept of "residential property" referred to therein, which the Stamp Duty Code (CIS)[8] does not give us, remitting to the Municipal Real Estate Tax Code (CIMI)[9] the regulation of such concept of property and of matters not regulated as to item 28 of the TGIS (no. 6 of article 1 and no. 2 of article 67 both of the CIS).
d) Now the CIMI in its article 2 gives us a generalist concept of property, in article 3 of the same statute the legislator, using criteria of use and location established the concept of rural properties, coming then, in a classification by the negative, in its article 4, to establish that urban properties shall be all those that should not be classified as rural.
e) Article 6 of the CIMI classifies urban properties as residential, commercial, industrial or for services, land for construction and others.
f) In the concrete case we are in the presence of an urban property with parts or divisions susceptible of independent use that compose the property in question, each one fulfilling, the concept of property established in article 2 of the CIMI, whose use is habitation and commerce.
g) As already stated each of the parts or divisions susceptible of independent use that compose the property in question fulfils the concept of property established in article 2 of the CIMI, in that they are physically and economically independent and form part of the patrimony of a natural or legal person, in the concrete case, legal person.
h) No. 4 of article 2 of the CIMI expressly contemplates the autonomous shares of properties in condominium ownership as property, yet it is also true that there is nothing in law that determines discrimination of taxation between the shares of properties in condominium ownership (article unique and shares identified by letters) and the parts or divisions with independent use (only not identified by letters) of properties in full ownership which, as already mentioned, fulfil the concept of property embodied in article 2 of the CIMI.
i) The taxation criterion must be uniform, that is, if a residential share of a property in condominium ownership is only taxed in Stamp Duty if its taxable real estate value is equal to or greater than €1,000,000.00, equally a storey or part of property in full ownership susceptible of independent use with residential use will only be taxed in Stamp Duty if its taxable real estate value is equal to or greater than €1,000,000.00.
j) As already stated the storey or part of property in full ownership susceptible of independent use of a property in full ownership meets the concept of property established in the CIMI, just as the autonomous shares of properties in condominium ownership.
k) In this perspective and considering that none of the parts or divisions susceptible of independent use with residential destination or use has taxable real estate value equal to or greater than €1,000,000.00 it is necessarily concluded that the Stamp Duty assessment acts are illegal by not having observed the conditions defined in item 28 of the TGIS.
l) The criterion used by the ATA in considering the sum of the taxable real estate values of the parts or divisions susceptible of independent use, arguing that the property is not constituted in condominium ownership, lacks legal support, being, in our understanding, the contrary that results from the application of the norms of the CIMI, applicable by reference.
m) Having reached this conclusion, the tribunal understands that the administrative appeal timely submitted against the assessments here in question should have been granted, given the illegality thereof, at the same time considering unnecessary the analysis of the eventual violation of no. 1 of article 24 of the RJAT.
3.2 – Right to payment of indemnity interest.
Considering that we have concluded for the illegality of the assessments and that the same will have been partially and/or wholly paid by credit compensation, the claimant is entitled to reimbursement of the Stamp Duty wrongfully paid.
In accordance with article 43 of the General Tax Law (LGT)[10] indemnity interest is due, whenever it is verified that there was error attributable to the services from which results wrongful payment of a tax obligation. Article 100 also of the LGT determines the obligation of the ATA to reconstitute the situation that would have existed if the annulled act had not been executed, comprising the payment of indemnity interest.
The partial and/or total payment/compensation being proven and the illegality of the assessments, the claimant is entitled to payment of indemnity interest in the precise terms of the already cited article 43 of the LGT and article 61 of the Tax Procedure and Process Code (CPPT)[11].
3.2 – Reimbursement of costs paid within the scope of tax enforcement proceedings
The claimant seeks that it be also reimbursed the default interest and costs that may have been paid in the tax enforcement proceedings, without, however, quantifying its amount nor making proof that such payment occurred. But even if such had occurred, it would not fall to this tribunal to know of such petition, since in accordance with the provisions of no. 2 of article 103 of the LGT, the acts executed, within the scope of tax enforcement, by the administrative authority, are appealable to the judge of execution.
V – DISPOSITIF
Based on the foregoing the tribunal decides as follows:
a) To declare the petition well-founded as to the petition for declaration of illegality of the tax assessment acts for Stamp Duty relating to the year 2015, challenged in the present case, with its consequent annulment, in the amount of €16,795.60.
b) To declare the petition well-founded as to the petition for annulment of the dismissal decision issued in the administrative appeal proceedings brought against the Stamp Duty assessments now annulled, with the legal consequences ensuing therefrom.
c) To declare the petition well-founded as to the petition for payment of indemnity interest on the amounts of Stamp Duty wrongfully paid, counted from the date of wrongful payment until the date of its reimbursement.
d) To declare the petition not well-founded as to the petition for payment of default interest and costs possibly paid within the scope of tax enforcement proceedings, having in mind the provisions of no. 2 of article 103 of the LGT.
e) To fix the value of the case at €16,795.60, considering the provisions contained in articles 299 no. 1 of the Civil Procedure Code (CPC)[12], 97-A of the CPPT and article 3 no. 2 of the Regulations on Costs in Tax Arbitration Proceedings (RCPAT)[13].
f) Costs to be borne by the respondent, under no. 4 of article 22 of the RJAT, fixing its amount at €1,224.00 in accordance with Table I of the RCPAT.
Notify.
Lisbon, 14 July 2017
Text produced by computer, in accordance with article 131 no. 5 of the CPC, applicable by reference of article 29 no. 1, paragraph e) of the RJAT, with blank verses and reviewed by me.
The sole arbitrator,
Arlindo José Francisco
[1] Acronym for Collective Legal Person Identification Number
[2] Acronym for Legal Framework for Tax Arbitration
[3] Acronym for Tax Authority and Customs Authority
[4] Acronym for Stamp Duty
[5] Acronym for Administrative Arbitration Centre
[6] Acronym for General Table of Stamp Duty
[7] Acronym for Taxable Real Estate Value
[8] Acronym for Stamp Duty Code
[9] Acronym for Municipal Real Estate Tax Code
[10] Acronym for General Tax Law
[11] Acronym for Tax Procedure and Process Code
[12] Acronym for Civil Procedure Code
[13] Acronym for Regulations on Costs in Tax Arbitration Proceedings
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