Summary
Full Decision
ARBITRAL DECISION
REPORT
A..., S.A., taxpayer no. ..., with registered office at ..., ..., ... - ... (hereinafter referred to as the "Applicant"), submitted on 09/03/2017 a request for arbitral pronouncement with a view to reviewing and declaring the illegality of the acts of assessment of Stamp Duty for the year 2012, relating to the application of Item No. 28.1 of the General Table of Stamp Duty (General Table), in the total amount of € 12,695.70 (twelve thousand, six hundred and ninety-five euros and seventy cents) on a property of which it is the owner.
The Esteemed President of the Deontological Board of the Center for Administrative Arbitration (CAAD) appointed, on 20/04/2017, as sole arbitrator the signatory of this decision.
On 14/06/2017 the arbitral tribunal was constituted.
In compliance with the provisions of Article 17, paragraph 1 of the Legal Regime of Tax Arbitration (LRTA), the Tax and Customs Authority (AT) was notified on 14/06/2017 to, if it so wished, submit a response and request the production of additional evidence.
On 01/08/2017 the AT submitted its response, requesting a waiver of the holding of the meeting described in Article 18 of the LRTA, as well as the production of submissions.
Being a matter exclusively of law, the arbitral tribunal on 22/08/2017 decided to waive the holding of the meeting to which Article 18, paragraph 1 of the LRTA refers, on the basis of the principle of autonomy of the arbitral tribunal in the conduct of the proceedings, inviting both parties to, if they so wished, submit optional written submissions and scheduled the date for delivery of the final decision.
Neither the AT nor the Applicant submitted optional written submissions.
PRELIMINARY MATTERS
The arbitral tribunal was regularly constituted and is materially competent.
The parties have legal personality and capacity and are legitimate, with no defects in representation.
There are no nullities, exceptions or preliminary questions that prevent knowledge of the merits and which it is necessary to raise ex officio.
Consequently, the conditions are met for the delivery of the final decision.
POSITIONS OF THE PARTIES
As the basis for its claim, the Applicant alleges, in summary, that the intention of the provision in question is to tax wealth and economic capacity in a special manner. In the present case, although the property in question is owned by a single entity, each of its independent divisions has a taxable property value of less than €1,000,000.00. This same property would not be taxed if it were in a situation of horizontal property ownership, since each autonomous fraction would not individually have a taxable property value equal to or greater than €1,000,000.00. Such fact thus results in a serious breach of the principle of equality, since materially similar situations are receiving different tax treatment.
Furthermore, the AT submits that the claim is without merit and, consequently, that the aforementioned assessment acts should be maintained, on the grounds that the taxable property value relevant for the purposes of the incidence of Stamp Duty consists of the total taxable property value of the urban property and not the taxable property value of each of the component parts, even when susceptible of independent use.
It concludes, with reference to recent case law of the Constitutional Court and, as well, to arbitral case law that the assessment acts of Stamp Duty in question do not violate any legal or constitutional principle.
MATTERS OF FACT
FACTS HELD AS PROVEN
In light of the documents furnished in the proceedings, it is held as proven that:
The Applicant is the owner of the property located on Rua ..., ..., registered in the urban property register of the Union of Civil Parishes of ... and ..., Municipality of Silves, under property article no. ... .
The property consists of full ownership with 21 floors or divisions with independent use, allocated to housing, whose taxable property value, determined under the Code of IMI, ranges between €50,530.00 and €155,990.00.
The property in question was registered in the matrix in 2012 and the sum of the taxable property values of the aforementioned autonomous fractions allocated to housing amounts to €1,269,570.00 (one million, two hundred and sixty-nine thousand, five hundred and seventy euros), with each of them individually having a taxable property value of less than €1,000,000.00.
The Applicant was notified of the assessment acts of Stamp Duty for the year 2012, carried out under Item No. 28.1 of the General Table, on the floors and divisions with independent use allocated to housing, in the total amount of €12,695.70 (twelve thousand, six hundred and ninety-five euros and seventy cents), namely:
Documents no. 2013 ..., no. 2013 ... and no. 2013 ... relating to the floor or division with independent use identified as "1st A", in the amount of €762.80;
Documents no. 2013 ..., no. 2013 ... and no. 2013 ... relating to the floor or division with independent use identified as "1st B", in the amount of €505.30;
Documents no. 2013 ..., no. 2013 ... and no. 2013 ... relating to the floor or division with independent use identified as "1st C", in the amount of €505.30;
Documents no. 2013 ..., no. 2013 ... and no. 2013 ... relating to the floor or division with independent use identified as "1st D", in the amount of €505.30;
Documents no. 2013 ..., no. 2013 ... and no. 2013 ... relating to the floor or division with independent use identified as "1st E", in the amount of €505.30;
Documents no. 2013 ..., no. 2013 ... and no. 2013 ... relating to the floor or division with independent use identified as "2nd A", in the amount of €762.80;
Documents no. 2013 ..., no. 2013 ... and no. 2013 ... relating to the floor or division with independent use identified as "2nd B", in the amount of €505.30;
Documents no. 2013 ..., no. 2013 ... and no. 2013 ... relating to the floor or division with independent use identified as "2nd C", in the amount of €505.30;
Documents no. 2013 ..., no. 2013 ... and no. 2013 ... relating to the floor or division with independent use identified as "2nd D", in the amount of €505.30;
Documents no. 2013 ..., no. 2013 ... and no. 2013 ... relating to the floor or division with independent use identified as "2nd E", in the amount of €505.30;
Documents no. 2013 ..., no. 2013 ... and no. 2013 ... relating to the floor or division with independent use identified as "3rd A", in the amount of €762.80;
Documents no. 2013 ..., no. 2013 ... and no. 2013 ... relating to the floor or division with independent use identified as "3rd B", in the amount of €505.30;
Documents no. 2013 ..., no. 2013 ... and no. 2013 ... relating to the floor or division with independent use identified as "3rd C", in the amount of €505.30;
Documents no. 2013 ..., no. 2013 ... and no. 2013 ... relating to the floor or division with independent use identified as "3rd D", in the amount of €505.30;
Documents no. 2013 ..., no. 2013 ... and no. 2013 ... relating to the floor or division with independent use identified as "3rd E", in the amount of €505.30;
Documents no. 2013 ..., no. 2013 ... and no. 2013 ... relating to the floor or division with independent use identified as "4th A", in the amount of €762.80;
Documents no. 2013 ..., no. 2013 ... and no. 2013 ... relating to the floor or division with independent use identified as "4th B", in the amount of €505.30;
Documents no. 2013 ..., no. 2013 ... and no. 2013 ... relating to the floor or division with independent use identified as "4th C", in the amount of €505.30;
Documents no. 2013 ..., no. 2013 ... and no. 2013 ... relating to the floor or division with independent use identified as "4th D", in the amount of €505.30;
Documents no. 2013 ..., no. 2013 ... and no. 2013 ... relating to the floor or division with independent use identified as "4th E", in the amount of €505.30;
Documents no. 2013 ..., no. 2013 ... and no. 2013 ... relating to the floor or division with independent use identified as "5th", in the amount of €1,559.90.
On 26/04/2013, the Applicant filed an administrative review of the aforementioned assessment acts, requesting their annulment on the grounds of illegality due to error in the legal prerequisites, which was rejected by order dated 26/06/2014.
On 26/07/2013, the Applicant filed a hierarchical appeal, which was rejected by order dated 07/12/2016.
FACTS HELD AS NOT PROVEN
There are no facts with relevance to the decision that have not been held as proven.
THE LAW
On the Incidence of Item No. 28.1 of the General Table
The question to be decided concerns solely whether, within the scope of the incidence of Stamp Duty referred to in Item No. 28.1 of the General Table, as amended by Law No. 55-A/2012 of 29 October, there are included, or not, residential urban properties which, although not constituted in horizontal property ownership, are composed of floors or divisions susceptible of independent use, whenever the taxable property value attributed to each of those distinct parts does not exceed the value of €1,000,000.00.
That is, it is a matter of determining whether the quantitative element relevant to the aforementioned provision should be considered based on the taxable property value attributed to each of the parts, as the Applicant contends, or whether that element is that resulting from the sum of the taxable property values attributed to them, as the AT argues.
According to the established facts, the AT assessed Stamp Duty on the grounds that the taxable property value of the urban property constituted in full ownership is greater than €1,000,000.00, taking into account the sum of the taxable property value of each of the 21 floors or divisions with independent use allocated to housing that comprise the aforementioned property.
On this matter, there is already abundant case law from the Supreme Administrative Court [1] (STA) and, as well, arbitral case law, which we indicate, by way of example, in proceedings no. 277/2013-T, no. 291/2013-T, no. 35/2014-T, no. 464/2014-T, no. 639/2014-T, no. 724/2014-T, no. 245/2014-T, no. 152/2015-T and no. 21/2015-T, which we follow.
As follows.
According to the provisions of Item No. 28 of the General Table, in force at the time of the facts, the following are included in the scope of incidence of Stamp Duty:
"Ownership, usufruct or right of surface of urban properties whose taxable property value contained in the register, in accordance with the Property Tax Code (CIMI), is equal to or greater than €1,000,000 - on the taxable property value used for purposes of IMI:
28.1 - Per residential property or per land for construction whose building, authorized or foreseen, is for housing, in accordance with the provisions of the Property Tax Code - 1%. [2]
28.2 - Per property, when the taxpayers that are not natural persons are resident in a country, territory or region subject to a clearly more favorable tax regime, contained in the list approved by order of the Minister of Finance - 7.5%".
The taxpayers are, therefore, and debtors of the tax, the owners, usufructuaries or superficiaries of the properties on 31 December of the year to which the tax relates, as follows from Article 8 of the Property Tax Code, by express reference in Articles 3, paragraph 3, subparagraph u), and 2, paragraph 4, of the Stamp Duty Code.
As regards the date of constitution of the tax obligation, tax connection, determination of the taxable base, assessment and payment of the stamp duty in question, the corresponding rules of the Property Tax Code are applicable, by express reference in Articles 5, paragraph 1, subparagraph u), 4, paragraph 6, 23, paragraph 7, 44, paragraph 5, 46, paragraph 5 and 49, paragraph 3, of the Stamp Duty Code. In general, by reference to Article 67, paragraph 2, of the same Code, the provisions of the Property Tax Code are applicable on a subsidiary basis to matters not specially regulated.
Now, with the type of property in question not being disputed, classified as urban and allocated for housing purposes, in accordance with the criteria established in Articles 2, 4 and 6 of the Property Tax Code, the question in issue is solely what is the exact meaning of "property value considered for purposes of IMI" contained in the provision on the incidence of Stamp Duty.
It is therefore necessary to resort to the rules of the Property Tax Code relating to the treatment that, for purposes of this tax, is given to parts of urban properties susceptible of independent use, in particular, as regards the determination of their respective taxable property value and rules applicable to the assessment and payment of the aforementioned tax.
Thus, in accordance with Article 12, paragraph 3 of the aforementioned Code, which establishes the concept of property register, "each floor or part of property susceptible of independent use is considered separately in the register entry, which discriminates the respective taxable property value."
Now, the autonomization in the register of the parts that are functionally and economically independent of a property in full ownership is linked to reasons of a fiscal and extrafiscal nature. On the fiscal plane, this autonomization is related to the very determination of the taxable property value, which constitutes the taxable base of IMI, given that the formula for determining that value, provided in Article 38 of the same Code, contains indices that vary depending on the use attributed to each of those parts. On the extrafiscal plane, this autonomization continues to find justification in the relevance attributed to the taxable property value of properties and their autonomous parts in the urban lease legislation.
This understanding is also shared by J. Silvério Mateus and L. Corvelo de Freitas [3] according to whom, "Another aspect that should be highlighted in the register has to do with the need to make relevant the autonomy that, within the same property, can be attributed to each of its parts, functionally and economically independent. In these cases, the register entry should not only make reference to each of these parts but should make express reference to the property value corresponding to each of them. An example that can illustrate this situation is the case of an urban property, not constituted under a horizontal property ownership regime and which is composed of several floors. (...) However, as each of these units can be the object of lease or any other use by the respective owner, the register must highlight these units and a property value must be assigned to each of them." [our emphasis].
In the economy of IMI, the autonomization of parts of urban property susceptible of independent use is not limited to their separation in the register entry and discrimination of the respective taxable property value. This autonomy also extends to the assessment of the tax itself.
Indeed, Article 119, paragraph 1, of the aforementioned Code provides that the tax assessment document must contain the discrimination of the properties, their parts susceptible of independent use and the respective taxable property value. For compliance with this provision, the assessment of IMI, in the strict sense of the application of the rate to the taxable base, does not take as reference the sum of the taxable property values attributed to the autonomous parts of the same property, but the value attributed to each of them individually considered.
Equally in the sense of individualization, for tax purposes, of the autonomous parts of urban properties, Article 15-O, paragraph 1, of Decree-Law No. 287/2003 of 12 November, as amended by Law No. 60-A/2011 of 30 November, is also relevant.
According to the provisions of the aforementioned rule, the safeguard clause relating to the increase in IMI taxation resulting from the general valuation of urban properties is applicable per property or part of urban property that is subject to the aforementioned valuation.
It results, therefore, from the relevant provisions of the Property Tax Code, applicable by reference to Stamp Duty referred to in Item No. 28.1 of the respective General Table, that the autonomous parts of urban properties assume full autonomy, in terms of valuation and description in the property register and tax assessment.
In referring to the property value considered for purposes of IMI, the provision on the incidence and quantification of Stamp Duty referred to in Item No. 28.1 of the respective Table can only appeal to the reality described above, that is, to the taxable property value considered for purposes of IMI in relation to each part of urban property susceptible of independent use.
As, moreover, is reflected in the assessments in question: the AT after, without legal support, carrying out the sum of the taxable property values of the various autonomous parts of the property to extract therefrom the quantitative prerequisite for the incidence of Stamp Duty, carries out the assessment by reference to each of those parts even though, individually, none of them reaches that value.
By all the foregoing, and in accordance with the established facts, the taxable property value of each of the 21 floors or divisions with independent use allocated to housing, which comprise the property constituted in full ownership, and which was determined in accordance with the rules of the Property Tax Code, is less than €1,000,000.00, and thus the prerequisites for taxation under Item No. 28.1 of the General Table are not met.
Therefore, the tax assessment acts of Stamp Duty, subject to the present arbitral pronouncement proceedings, in the total amount of €12,695.70, are vitiated by the defect of violation of the provisions of Item No. 28.1 of the General Table and Article 67, paragraph 2, of the Stamp Duty Code, due to error in their legal prerequisites, and the illegality of those assessment acts is hereby declared, with the consequent annulment thereof.
Having concluded that the assessment acts of Stamp Duty which are the subject of the present arbitral pronouncement request are vitiated by a defect of violation of law which requires their annulment, the examination of the other questions relating to the legality (due to violation of the constitutional principle of equality) of those acts is rendered superfluous and unnecessary.
On the Right to Compensatory Interest
In addition to the annulment of the assessments and consequent reimbursement of the amounts unduly paid, the Applicant further requests that it be recognized as having the right to compensatory interest, under Article 43 of the General Tax Law.
Indeed, pursuant to the provision of paragraph 1 of the aforementioned article, compensatory interest is due "when it is determined, in administrative review or judicial challenge, that there was error attributable to the services as a result of which the tax debt was paid in an amount greater than that legally due." In addition to the means referred to in the provision transcribed, we understand that, as follows from paragraph 5 of Article 24 of the LRTA, the right to the aforementioned interest may be recognized in the arbitral process and thus the claim is heard.
The right to compensatory interest to which the aforementioned provision of the General Tax Law refers presupposes that tax was paid in an amount greater than that due and that such derives from error, of fact or of law, attributable to the services of the AT. In the present case, both conditions are shown to be met, and thus the obligation of compensatory interest is constituted in favor of the taxpayer, which is hereby declared.
DECISION
With the grounds set forth, the arbitral tribunal decides:
To find the arbitral pronouncement request well-founded and, in consequence, to declare illegal the assessments of Stamp Duty, contained in the identified assessment documents, with all legal consequences;
To find the claim for recognition of the Applicant's right to the payment of compensatory interest well-founded;
To order the AT to refund to the Applicant the Stamp Duty unduly paid, in the amount of €12,695.70;
To order the AT to pay the costs.
VALUE OF THE CASE
The value of the case is fixed at €12,695.70 (twelve thousand, six hundred and ninety-five euros and seventy cents), in accordance with Article 97-A of the Code of Tax Procedure and Process (CPPT), applicable pursuant to subparagraphs a) and b) of paragraph 1 of Article 29 of the LRTA and paragraph 2 of Article 3 of the Regulation on Costs in Tax Arbitration Proceedings (RCPAT).
COSTS
Costs to be borne by the AT, in the amount of €918 (nine hundred and eighteen euros), in accordance with Table I of the Regulation of Costs in Tax Arbitration Proceedings, pursuant to paragraph 2 of Article 22 of the LRTA.
Notification to be made.
Lisbon, 21 September 2017
The Arbitrator,
(Hélder Filipe Faustino)
Document drawn up by computer, in accordance with the provisions of paragraph 5 of Article 131 of the Code of Civil Procedure, applicable by reference from subparagraph e) of paragraph 1 of Article 29 of the LRTA. The writing of the present decision is governed by the spelling prior to the Orthographic Agreement of 1990.
[1] By way of example, we highlight the Decision rendered in proceedings no. 047/15, of 09/09/2015, according to which: "I - As regards properties in vertical ownership, for purposes of the incidence of Stamp Duty (Item 28.1 of the GSTD, in the wording of Law No. 55-A/2012 of 29 October), the subjection is determined by the combination of two factors: residential allocation and the TPV contained in the register equal to or greater than €1,000,000. II - In the case of a property constituted in vertical ownership, the incidence of SD should be determined, not by the TPV resulting from the sum of the TPV of all divisions or floors susceptible of independent use (individualized in the property article), but by the TPV attributed to each of those floors or divisions intended for housing.", available at www.dgsi.pt
[2] This wording was amended by Law No. 83-C/2013 of 31 December, without, however, having great relevance to the case in question.
[3] "Property Taxes and Stamp Duty, Commented and Annotated", pages 159 and 160.
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